Investing.com — Telecom equipment supplier Ericsson ( ST: ) faces a challenging 2025 as demand uncertainty and competitive pressures cloud its outlook, Bernstein said, reiterating his “Underperform” rating on the stock with a SEK 74 price target.
The sector, already reeling from a sharp contraction in 2023-24, is unlikely to rebound strongly, Bernstein warned, citing weak capital expenditure trends among telecom operators and slowing data usage growth.
If the expected recovery in 2025 fails to offset larger-than-expected declines in 2024, the industry could face a drop in demand, Bernstein added.
Ericsson’s lack of visibility adds to the concern, as the company refrains from providing guidance for more than a quarter. Recent downgrades by market research firm Dell’Oro also signal downside risks to the mobile radio access network (RAN) market, a key revenue driver for Ericsson.
While Ericsson surprised investors by increasing revenue from its deal with AT&T (NYSE: ) in the third quarter of 2024, management tempered expectations for the fourth quarter of 2024, further dampening optimism. Bernstein said caution is warranted until the company offers more clarity on its FY25 outlook.
Nokia (HE:), Ericsson’s main rival, is rated as “market perform” with a price target of 4.65 euros. Bernstein pointed to Nokia’s diversified exposure to fixed and fiber networks, which could benefit from the acquisition of Infinera (NASDAQ: ), expected in early 2025.
The telecommunications equipment industry also continues to struggle with competitive pressure from Chinese suppliers, despite sanctions and security concerns expressed by Western governments.
Bernstein urged investors to brace for further turbulence, suggesting that while greater opportunities may lie in investing in AI-driven data centers, such advantages are unlikely to offset the structural challenges facing mobile networking.
