Ericsson (ticker: ERICY) held an analysts' day on Thursday. Here are the conclusions of Lehmann Brothers analysts Tim Luke and Stuart Jeffrey, who have an 'overweight' rating on the stock and a target of $42:
- While no major new initiatives were unveiled, presentations focused on general strategy, the acquisition of Marconi and Ericsson’s views of network evolution and on opportunities in services. We remain encouraged that ERICY’s core growth outlook and operating margin targets appear in tact despite some possible GM pressures. Our SEK/$ 05/06 estimates remain unchanged. With a solid competitive position and current valuation of 15x our 2006 estimate of $2.14, we maintain our 1OW rating.
We believe Ericsson is likely to remain a key beneficiary of continued healthy demand trends in carrier spending, and given its dominant share position (30%+) in a growing market with continued confidence from management around a more gradual decline in margins, our 2005 and 2006 EPS estimates of $1.97 and $2.14 remain unchanged. Our price target remains $42 or around 18x CY06 EPS estimate.
Ericsson 1-yr chart:
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