Ericsson Slips as Nordea Sees Currency Headwind: Stockholm MoverToby Alder
Ericsson AB, the world’s largest maker of wireless networks, fell for a third day as Nordea Bank AB cut its rating on the stock to hold from buy and lowered its 12-month price estimate.
Ericsson fell as much as 2 percent to 81.8 kronor, adding to a 2.2 percent slide yesterday and a 0.2 percent drop on March 15. The share traded 1.6 percent lower at 82.15 kronor as at 10:07 a.m. in Stockholm, valuing the company at 271 billion kronor ($42 billion).
Near-term risk on Ericsson’s share is “mostly due to a significant currency headwind,” Nordea analysts Daniel Djurberg and Sami Sarkamies said in a note to clients today. They see “pressure on a swift margin recovery” and “little room for quarterly setbacks” after Ericsson’s share price has risen 40 percent since its capital markets day last November.
“We argue that much of the operational improvement that we and consensus foresee in 2013-15 has already been discounted,” Djurberg and Sarkamies said in the note, as they cut their price estimate to 87 kronor a share from 89 kronor. “Looking one year ahead, we believe that some uncertainly will enter regarding the 2014 and 2015 revenue prospects.”
STMicroelectronics NV and Ericsson yesterday agreed to split up their unprofitable ST-Ericsson chip venture after failing to find a buyer for the business, cutting about 1,600 jobs as they divide the assets.
“Although the split-up outcome of the ST-E joint venture with STMicroelectronics was the most likely, we had hoped for a total downwinding, including a full closure,” the analysts said.