Ericsson AB, the world’s biggest maker of wireless networks, fell the most in almost three months in Stockholm trading as Barclays Plc said third-quarter earnings will probably disappoint and cut its stock rating.
The shares lost as much as 2.7 percent to 82.5 kronor, the steepest intraday decline since July 18. Ericsson lost 2.3 percent to 82.8 kronor as of 10:28 a.m. local time, giving the Stockholm-based company a market value of 272.5 billion kronor ($42 billion). The stock has gained 27 percent so far this year.
Barclays cut its recommendation on Ericsson shares to underweight from equal-weight, saying in a note to clients today that it sees 20 percent downside to its share price estimate of 68 kronor. Ericsson, which plans to publish its third-quarter earnings report on Oct. 24, will probably report sales of 54.8 billion kronor and a gross margin of 33.2 percent in the three months through September, according to the average of analyst estimates compiled by Bloomberg.
“We do not subscribe to the consensus view of both revenue growth and gross margin expansion and expect Ericsson to disappoint on the top line, as the network modernization and 4G projects pass their peaks,” Barclays said. “Ericsson is facing difficult comparables in the U.S. and developed Asia and we do not see improvement in Europe as sufficient to drive growth. We do, however, expect gross margin to improve.”
The company would face increased competition in most merger and acquisition scenarios, such as a possible tie-up between Nokia Oyj and Alcatel-Lucent SA, Barclays said.