Ericsson is one of the two Western leaders in mobile-network (RAN) equipment, paired with a high-margin intellectual-property-rights (IPR) licensing business and a growing enterprise/Cradlepoint arm. The reported 73% adjusted ROIC overstates the franchise — it reflects a small invested-capital base (large net cash), not unusual capital efficiency.
The market prices Ericsson for near-zero growth (~0.9% implied), and the reverse-DCF reads ~+25% — i.e. the equity is cheap on earnings. The offset is structural: 5G network capex has peaked, the RAN market is mature/competitive (vs Nokia, Huawei restrictions), and IPR/licensing is lumpy. Cost discipline and enterprise diversification are the levers.
Treating the headline ROIC with caution (net-cash/low-IC), the equity is cheap on earnings with the reverse-DCF ~+25%, but the structural maturity of networks caps the multiple. We anchor a modestly positive base.
Base SEK 135 (+6%) on cost discipline plus IPR; bull SEK 170 (margin recovery, enterprise growth, a strong IPR-renewal cycle); bear SEK 100 (RAN-market decline and pricing pressure).
The market pays today’s enterprise value for roughly -3.7% NOPAT growth over 5 years. The business earns 73% on capital against a 8% cost of capital (spread +64.9 pp); the no-growth value is SEK 145/share (114% of price), so the rest is priced-in growth.
| Scenario | 24m target | Impl. g | Upside | Prob. | Driver |
|---|---|---|---|---|---|
| Bull | SEK 170 | +5% | +34% | 35% | Margin recovery + enterprise + strong IPR cycle |
| Base | SEK 135 | -2% | +6% | 40% | Cheap on earnings; networks mature |
| Bear | SEK 100 | -11% | -21% | 25% | RAN-market decline + pricing pressure |
| Prob-weighted | SEK 138 | — | +9% | 100% | Scenario-weighted expected value |
| WACC \ g | 0% | 3% | 5% | 8% | 10% | 15% |
|---|---|---|---|---|---|---|
| 6.50% | 190 | 214 | 231 | 259 | 279 | 337 |
| 7.25% | 164 | 183 | 197 | 220 | 237 | 284 |
| 8.00% (base) | 145 | 161 | 173 | 192 | 206 | 246 |
| 8.75% | 130 | 144 | 154 | 171 | 183 | 217 |
| 9.50% | 119 | 131 | 140 | 154 | 165 | 194 |
Green = fair value above the current price of SEK 127.00. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.
⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.
A high-margin essential-patent licensing franchise provides resilient, if lumpy, cash flow.
Restructuring and cost cuts support margins as network revenue matures.
The market prices ~flat growth; the reverse-DCF reads ~+25%.
Cradlepoint/enterprise networking diversifies beyond carrier RAN.
A strong balance sheet funds the dividend and buybacks.
Ericsson is a mature network-equipment leader plus an IPR annuity, cheap on earnings with the market pricing stagnation. HOLD with a slight positive lean, medium conviction; base target SEK 135 (+6%).
Cost discipline, enterprise growth and a strong IPR cycle are the upside; RAN-market decline is the principal risk.