Erste analysts have upgraded their recommendation for Ericsson Nikola Tesla shares to “Accumulate,” while slightly lowering the target price from 1,200 to 1,170 kuna.
Although some pressure on the share price was expected due to challenging business conditions in certain markets, the price reaction was excessive and the decline in recent months was more significant than fundamentals indicate.
The company’s half-year results even exceeded analysts’ expectations, prompting a slight increase in annual forecasts compared to the previous analysis. Erste expects revenue growth of just below 5 percent this year, with net profit levels on par with last year. The company has continued its cost-saving measures, especially regarding general and administrative expenses, which were reduced by about 22 percent in the first half and could yield savings of over 15 million kuna on an annual basis.
The company’s revenues in the domestic market are likely to experience a certain decline this year; however, from a slightly higher base, while the best performance from export markets comes from Ericsson’s internal market, which holds a dominant position in the revenue structure and could end the year with growth of over 20 percent.
This has been particularly aided by the managed services contract with Hrvatski Telekom, which affects slightly lower margins of the company, but simultaneously reduces the business and operational risks of the company. Weaker performance in the Commonwealth of Independent States market is likely to continue in the second half of the year, but it has largely already been factored into the share price.
