ERICSSON / NOKIA : Dell'Oro Q1 26 - global ex China RAN growth slows to 3%

研报英文原文证据摘录

ERICSSON / NOKIA : Dell'Oro Q1 26 - global ex China RAN growth slows to 3%

Investment case, valuation and risks

Ericsson (Underperform, Target Price SEK85)

Investment case

Ericsson is almost entirely a pure play on mobile networks investments by telcos, and

we expect growth here to be anaemic both in 2026 and over the next 3 years. We are

now in the tail-end of the 5G investment cycle where both revenues and multiples tend

to deteriorate. In the US there is a glut of mobile network capacity, and operators face

FCF headwinds (e.g. tax). In Europe operators have struggled to monetise 5G and

therefore are reluctant to invest. In India investments are set to come down from record

levels. Long term (2028+) we expect 6G investment to be slow and see O-RAN risk in

the next technology cycle.

Valuation methodology

We use a 50/50 DCF/target PE ratio to set our TP of SEK85/sh. For the DCF we assume

a 9% WACC and a -2% terminal growth rate reflecting a cautious long term industry

view. For our target PE we use 14x based on headline EPS.

Risks

To the upside:

Upside risks include 1) faster than expected growth as 5G development plans are

accelerated; 2) if the company manages to renegotiate or turn around loss-making

contracts in Enterprise more quickly than expected; 3) greater than expected market

share gains against as Chinese competitor weakens outside of China.

To the downside:

Downside risks include Ericsson's ability to 1) turn around its loss-making Enterprise

business; 2) continued negative compliance related newsflow; 3) maintain product

competitiveness as competitors increase investment; 4) slowing traffic growth leading to

lower mobile operator spend

Ericsson ADR (Underperform, Target Price USD9.2)

therefore are reluctant to invest.