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Shares of Ericsson Plunge on Unchanged 2022 Margin Targets

Practice Stock Trading
Updated: 11 November 2020

Shares of Ericsson (STO: ERIC) plunged 6.6% on Tuesday to erase vaccine-fueled gains on Monday after the telecom group didn’t change its 2022 operating margin target.

Ericsson left its operating market target at 12%-14%, while the same margin for networks was raised to 16%-18% from prior 15%-17%. The upgraded network margin was offset by lower margin target for digital services business, which now stands at 4%-7% from 10%-12% previously communicated.

“Sometimes we overfocus on 2022. It’s only a milestone to something greater,” CEO Borje Ekholm said.

Ericsson also introduced a new target of long-term free-cash-flow (FCF) of 9% to 12% of sales.

“The new long-term adjusted EBITA and FCF (free cash flow) targets are positive and probably above most analysts’ long-term estimates. Having said that they are seen as distant and thereby vague,” Handelsbanken analyst Daniel Djurberg told Reuters.

Ericsson share price falls on unchanged 2022 margin targets November 2020

Ericsson share price fell 6.6% to post the worst day in 8 months. Last month, shares of Ericsson printed an all-time high at 119.00.

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