© Reuters. Ericsson (ERIC) downgraded to Sell at UBS on OpenRAN concerns
UBS has downgraded Ericsson (ERIC) to ‘Sell’ from ‘Neutral’ and lowered its price target on the stock to SKr 51 from SKr 54 on medium and long-term concerns around OpenRAN.
“2024 remains challenging – we expect India spending to level off in 2024 after a significant year of investment, and also lack of growth in Europe mainly due to macro uncertainty. Overall, we expect a 4% y-o-y decline in telco capex in 2024E,” wrote analysts in a note Wednesday.
They also believe the market is pricing more than 1x EV/Sales for Network vs negative value for Nokia Network, despite the OpenRAN overhang.
By making it easier for operators to mix and match radio vendors within a given region and allow the use of radio software with off-the-shelf hardware, OpenRAN is likely to reduce barriers to entry, and poses a threat in terms of both pricing and market share.
“With AT&T’s announcement of planning to lead in the US in OpenRAN deployment, and targeting 70% of its wireless network traffic to flow across open-capable platforms by late 2026, we believe the effects of the OpenRAN disruption will start emerging, and will have a negative impact on Ericsson and the wireless telco equipment landscape in the medium term,” added the analysts.
As of early trading Wednesday, Ericsson’s ADR shares are trading down 2.38% at $5.54.
