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.