Investing.com — Telecom equipment supplier Ericsson (ST:ERICb) faces a challenging 2025 as demand uncertainty and competitive pressures cloud its outlook, Bernstein said, reiterating its “Underperform” rating on the stock with a price target of SEK 74.
The sector, already reeling from a steep contraction in 2023-24, is unlikely to see a robust recovery, Bernstein warned, citing weak capital expenditure trends among telecom operators and slowing growth in data usage.
In case the anticipated 2025 rebound fails to offset deeper-than-expected declines in 2024, the industry could face a demand downdraft, Bernstein added.
Ericsson’s lack of visibility adds to concerns, with the company refraining from providing guidance beyond a quarter. Recent downgrades by market research firm Dell’Oro also signal downside risks for the mobile radio access network (RAN) market, a key revenue driver for Ericsson.
While Ericsson surprised investors with revenue gains from its AT&T (NYSE:T) contract in Q3 2024, management tempered expectations for Q4 2024, further dimming optimism. Bernstein said caution was warranted until the company offers more clarity in its FY25 outlook.
Nokia (HE:NOKIA), Ericsson’s main rival, was rated “Market Perform” with a target price of €4.65. Bernstein noted Nokia’s diversified exposure to fixed-line and optical networking, which could benefit from its pending acquisition of Infinera (NASDAQ:INFN), expected to close in early 2025.
The telecom equipment industry also continues to grapple with competitive pressure from Chinese vendors, despite sanctions and security concerns raised by Western governments.
Bernstein urged investors to brace for further turbulence, suggesting that while larger opportunities may lie in AI-driven data center investments, such benefits are not likely to offset the structural challenges facing mobile networking.
