Ericsson (ERIC) Stock Up on Mobile Data Traffic Growth Expectations
NEW YORK (TheStreet) -- Shares of Ericsson (ERIC) - Get Report are higher by 0.10% to $9.55 in pre-market trading on Tuesday morning, after the communications and technology services provider hiked its forecast for mobile data traffic growth.
The higher guidance comes as the use of video increases while smartphone subscriptions continue to rally, Reuters reports.
The Swedish company is expecting a tenfold gain in mobile data traffic between 2015 and 2021, Reuters added. In June the company said it was anticipating only an eightfold rise between 2014 and 2020.
"Based on recent network measurements, a stronger than anticipated growth of average data traffic consumption per user resulted in a significant upward adjustment of our forecast," the company said, according to Reuters.
Ericsson is expecting video to increase its share total of mobile traffic to 70% in 2021, up from close to 50% in 2015.
Separately, TheStreet Ratings team rates ERICSSON as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate ERICSSON (ERIC) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ERIC's revenue growth has slightly outpaced the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ERIC's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
- ERIC has underperformed the S&P 500 Index, declining 21.68% from its price level of one year ago.
- 38.55% is the gross profit margin for ERICSSON which we consider to be strong. Regardless of ERIC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ERIC's net profit margin of 5.25% is significantly lower than the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Communications Equipment industry and the overall market on the basis of return on equity, ERICSSON has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full analysis from the report here: ERIC
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.