Value
5.9/10data confidence 50%| Component | Sub-score |
|---|---|
| P/E | 7.1 |
| Fwd P/E | 7.2 |
| Analyst target | 3.0 |
- ▸Forward P/E: 17.5x
ERIC · Why this verdict
Why Ericsson (ERIC) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score5.1/10
ConfidenceHIGH
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Ericsson has delivered three consecutive strong earnings beats with an average upside surprise close to 60% and trades roughly 10% below its technical price target with a favorable risk/reward of approximately 1.5-to-1 at an attractive valuation relative to sector peers; however, a legal matter has triggered a hard gate failure, the business is experiencing a 10% revenue decline, and the most recent quarter came in essentially in line after three prior beats, suggesting the beat cadence may be softening.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue fell 10% year-over-year in the most recent period, indicating the business is shrinking; the growth profile sits at the weakest possible reading, which limits the investment case despite solid earnings quality. Growth breakdown | Revenue growth turns positive year-over-year for 2 consecutive quarters, signaling the top-line contraction has stabilized. | →Stable |
| CounterThree of the last four quarters produced large positive EPS surprises despite declining revenues, demonstrating cost discipline that could accelerate earnings recovery even before revenue growth resumes. | ||
A legal matter flagged in recent news has triggered a hard gate failure, creating unquantified financial and reputational exposure that constrains the investment case until the matter is resolved. Engine gate (failed) | Legal proceedings are resolved within 2 quarters with no related EPS estimate revision exceeding 5% downward, removing the gate failure. | →Stable |
| CounterThe earnings beat cadence and rising on-balance volume suggest the underlying business continues to execute well despite the legal cloud, and the return-on-equity profile indicates the franchise has not been structurally impaired. | ||
The business produced three consecutive strong earnings beats — with upside surprises of roughly 17%, 192%, and 26% respectively — before the most recent quarter came in essentially in line, resulting in an average upside surprise close to 60% across the last four quarters. Earnings | EPS surprises return to positive territory for the next 2 quarters with average surprise staying above 10%. | ↓Deteriorating |
| CounterThe most recent in-line print, following three strong beats, may signal that the earnings recovery is plateauing; with revenues still declining, sustaining positive surprises becomes harder as the cost-cutting runway narrows. | ||
The shares trade at a forward earnings multiple of 18x with a return on equity of 27% — both screening attractively relative to communication-equipment peers — and roughly 10% below the technical price target at a favorable risk/reward of approximately 1.5-to-1, though just below the minimum bar for a conviction addition. Peer-rank breakdown | Price closes the roughly 10% gap to the $13.49 technical target over the next 12 months as earnings quality stabilizes. | →Stable |
| CounterAttractive peer-relative value and a favorable risk/reward can persist without re-rating if the legal overhang lingers and revenues continue to decline; the 10% headroom to target is a real and meaningful move but does not clear the bar for adding with conviction. | ||
Revenue fell 10% year-over-year in the most recent period, indicating the business is shrinking; the growth profile sits at the weakest possible reading, which limits the investment case despite solid earnings quality.
→StableGrowth breakdown
- Expectation
- Revenue growth turns positive year-over-year for 2 consecutive quarters, signaling the top-line contraction has stabilized.
CounterThree of the last four quarters produced large positive EPS surprises despite declining revenues, demonstrating cost discipline that could accelerate earnings recovery even before revenue growth resumes.
A legal matter flagged in recent news has triggered a hard gate failure, creating unquantified financial and reputational exposure that constrains the investment case until the matter is resolved.
→StableEngine gate (failed)
- Expectation
- Legal proceedings are resolved within 2 quarters with no related EPS estimate revision exceeding 5% downward, removing the gate failure.
CounterThe earnings beat cadence and rising on-balance volume suggest the underlying business continues to execute well despite the legal cloud, and the return-on-equity profile indicates the franchise has not been structurally impaired.
The business produced three consecutive strong earnings beats — with upside surprises of roughly 17%, 192%, and 26% respectively — before the most recent quarter came in essentially in line, resulting in an average upside surprise close to 60% across the last four quarters.
↓DeterioratingEarnings
- Expectation
- EPS surprises return to positive territory for the next 2 quarters with average surprise staying above 10%.
CounterThe most recent in-line print, following three strong beats, may signal that the earnings recovery is plateauing; with revenues still declining, sustaining positive surprises becomes harder as the cost-cutting runway narrows.
The shares trade at a forward earnings multiple of 18x with a return on equity of 27% — both screening attractively relative to communication-equipment peers — and roughly 10% below the technical price target at a favorable risk/reward of approximately 1.5-to-1, though just below the minimum bar for a conviction addition.
→StablePeer-rank breakdown
- Expectation
- Price closes the roughly 10% gap to the $13.49 technical target over the next 12 months as earnings quality stabilizes.
CounterAttractive peer-relative value and a favorable risk/reward can persist without re-rating if the legal overhang lingers and revenues continue to decline; the 10% headroom to target is a real and meaningful move but does not clear the bar for adding with conviction.
Per-dimension breakdown
Quality
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 6.0 |
| ROA | 4.7 |
| Gross margin | 5.6 |
| Op margin | 0.0 |
| Net margin | 4.2 |
| Current ratio | 4.5 |
| Moat | 6.2 |
| Piotroski F | 8.9 |
- ▸Strong Piotroski F-Score: 8/9
Growth
3.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.9 |
| EPS growth | 2.3 |
Momentum
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.4 |
| MACD | 9.1 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 1.6 |
- ▸Overbought (RSI 72)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.0 |
| Analyst rating | 5.0 |
| Price target | 3.0 |
- ▸Below analyst target
Insider
5.0/10data confidence 50%Peer rank
5.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.8 |
| quality rank | 6.2 |
| growth rank | 1.7 |
- ▸Attractive P/E vs peers
Technical
2.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.2 |
| support resistance | 0.3 |
| 52w position | 6.2 |
Risk (lower is worse)
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.8 |
| days to cover | 3.1 |
| volatility | 5.5 |
| put call | 5.8 |
| implied vol | 7.3 |
| max pain risk | 3.0 |
| beta | 9.9 |
| debt equity | 8.4 |
| news risk | 6.0 |
- ▸Above max pain $2
Catalyst
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 5.8 |
| news activity | 5.0 |
- ▸Strong earnings: 3B/0M
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:6.8>=5.5
- INSIDER:OK
- 8K:CLEAN
- EARNINGS_PROXIMITY:85d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-1.7=NEGATIVE
Warning (0)
none
Reward-to-Risk
-1.68
Upside
-25.2%
Downside
15.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 3.8 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Momentum at 6.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-1.7=NEGATIVE) reinforce the read. Current asymmetry R:R is -1.68 — supplementary context, not the trigger for this path.
The strongest dimensions are Momentum at 6.8, Catalyst at 6.8, and Risk (lower is worse) at 6.4; the weakest are Technical at 2.6, Growth at 3.1, and Sentiment at 4.7. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -1.68 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Legal Risk Gate Failure
Trip ifLegal proceedings are resolved within 2 quarters with no related EPS estimate revision exceeding 5% downward.
- P2Revenue Decline Weak Growth
Trip ifRevenue growth turns positive year-over-year for 2 consecutive quarters, exceeding 0%.
- P3Earnings Beat Cadence
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P4Attractive Peer Relative Valuation
Trip ifReturn on equity falls below 15% for 2 consecutive quarters as earnings compress.