Ericsson Is Down 27% From Its High-Why Cash Flow and Earnings Can Still Make It a Bargain

Ericsson looks cheap because the market still doubts the recovery

At SEK 10.06, Ericsson is trading near its 52-week average of SEK 10.28 and 36.9% below the 52-week high. That leaves room for the bullish case, but it also shows what investors are still demanding: proof of earnings durability, not just turnaround hope.

Why the bull case still exists

A blended fair value estimate of SEK 98.62 suggests analysts still see meaningful upside from current levels. Nordea upgraded Ericsson to Buy from Hold and set a SEK 120 price target, citing cost cuts and growth opportunities. On top of that, Ericsson net cash flow for the twelve months ending June 30, 2026 was $0.558B, which supports the idea that the business is producing more cash than the share price might imply.

Why skepticism still makes sense

The bearish view is not hard to understand. RAN (radio access network) market anticipated to remain flat in 2026, and BofA adjusted its target slightly lower to SEK 88 from SEK 89, highlighting a more cautious angle. The debate, then, is straightforward: is Ericsson a temporary discount, or is the market underestimating a real earnings recovery?

Q1 results show better operating quality than headline revenue implies

One quarter of softer reported revenue does not automatically break the case.

What improved

Ericsson delivered organic sales growth of 6%, and organic growth remained positive across all business segments. That matters because it suggests the growth was broad-based rather than dependent on a single segment.

Reported sales still fell to SEK 49.3 (55.0) b, and adjusted EBITA margin slipped to 11.3% (12.6%), mainly because of currency headwinds. The takeaway is not that the quarter was flawless, but that the operating backdrop was firmer than the headline revenue decline might suggest.

The earnings debate: adjusted strength versus reported pressure

Bulls can argue that timing, currency, and one-off charges have distorted the reported picture. Bears have a valid counter: reported EBITA was SEK 1.8 (6.7) b., impacted by -3.8 (-0.3) b. of restructuring charges, and net income was SEK 0.9 (4.2) b. Those pressures are real, and investors should not brush them aside.

What could drive a re-rating

The key watchpoint is whether Ericsson can keep organic growth positive while stabilizing profitability once restructuring and currency effects are accounted for. If the next few quarters show that adjusted margins can hold or improve, the stock has a clearer path to trading on earnings quality rather than on recovery expectations alone.