STOCKHOLM - Ericsson (BS:ERICAs)'s recent $14 billion contract with AT&T (NYSE:T) for network equipment has led to a positive outlook from Jefferies, upgrading the company's rating to 'Buy' and lifting its price target to SEK70. This significant win is anticipated to boost Ericsson’s future earnings by over 10%, supported by cost-reduction strategies and expected revenue growth. Following the announcement, Ericsson's American Depositary Receipts (ADRs) saw a 1% increase.
In contrast, Nokia (HE:NOKIA) experienced a setback as Jefferies downgraded its rating to 'Hold' and lowered the price target to €3. This revision comes after Nokia lost the AT&T contract to Ericsson, which is likely to cause a decrease in revenue for Nokia and introduce challenges in margin improvement within its mobile network sector. The company is also grappling with issues such as inventory correction and a sluggish performance in its network infrastructure division. Despite these concerns, Nokia’s ADRs unexpectedly rose by 2.2%.
The competition between the two telecom giants has been influenced by the adoption of open RAN technology, which allows for more flexible networks through the integration of equipment from multiple providers. AT&T's decision to establish an open RAN network next year favored Ericsson over Nokia due to its more established presence within the open RAN ecosystem.
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