Ericsson Plummets 8%—Tariffs and Tech Woes Fuel Chaos in Telecom

• Ericsson (ERIC) plunges 8.4% to $7.18, nearing its 52-week low of $6.41
• Q2 profit beat forecasts but U.S. tariff threats crimped margins and investor sentiment
• Sector-wide tech retreat spooks traders as AT&T’s data breach drags telecom stocks lower

Ericsson’s brutal intraday drop marks its worst performance since late 2023, with shares breaking through critical support at $7.60. The plunge coincides with sector-wide headwinds as cybersecurity fears and macroeconomic uncertainty overshadow 5G/6G advancements. The stock trades at 14.7x forward earnings—below its sector average—amid $728M in adjusted profits and a 6% revenue dip.

Tariffs and Sector Spillover Sink Ericsson’s Momentum
Ericsson’s collapse stems from two interwoven catalysts: escalating U.S.-EU tariff tensions and spillover effects from the AT&T data breach. While the company reported a $728M Q2 profit beat, CEO Borje Ekholm warned that U.S. tariffs—potentially hitting 30%—could further squeeze margins. This comes as the telecom sector faces broader investor skepticism: AT&T’s admission of 109M customer data breaches sent shockwaves through the sector, with Cisco (CSCO) dipping 0.8% and Nokia (NOK) flattish. Ericsson’s role in global telecom infrastructure amplifies its sensitivity to systemic risks, as investors price in geopolitical and cybersecurity uncertainties.

Telecom Equipment Sector in Freefall—Ericsson’s Pain is the Norm
Ericsson’s 8.4% drop mirrors broader sector malaise. Cisco (CSCO), the sector bellwether, fell 0.8% on Tuesday, while Nokia (NOK) held steady amid fiber rollout gains. The divergence highlights Ericsson’s heightened vulnerability: its reliance on high-margin U.S. sales and global supply chains leaves it exposed to tariff volatility. Meanwhile, peers like Huawei—absent from U.S. markets—are advancing 5G/6G standards without tariff headwinds. The sector’s 15.7% CAGR for telecom APIs (per MarketsandMarkets) faces execution hurdles as macro risks overshadow growth narratives.

Bearish Bias Rules—Target ERIC Puts in Oversold Territory
Technical Indicators
• Bollinger Bands: Trading below lower band ($7.97) with 30-day MA at $8.40
• RSI: 33.62 (deep oversold)
• MACD: -0.08 (bearish crossover)
• Support/Resistance: Near-term $7.20 support, $7.60 resistance (prior support)

Traders should fade rallies above $7.60 with puts until sector sentiment stabilizes. Focus on these top options:

1. ERIC20250815P7 (Put, $7 strike, Aug 15 expiry)
- Implied Volatility: 26.72% | Leverage Ratio: 55.5%
- Delta: -0.33 | Theta: -0.002 | Gamma: 0.63
- Turnover: 1,348 contracts
- Why Buy? High leverage at the money strike with strong gamma for volatility spikes.

2. ERIC20250815C7 (Call, $7 strike, Aug 15 expiry)
- Implied Volatility: 27.81% | Leverage Ratio: 20.04%
- Delta: 0.66 | Theta: -0.005 | Gamma: 0.61
- Turnover: 2,971 contracts
- Why Monitor? Bearish squeeze potential if volatility surges—call decay accelerates if prices stay below $7.

In a 5% downside scenario ($6.94), ERIC20250815P7 yields $0.06 payoff while calls expire worthless. Aggressive shorts may target puts into $7.20 support—avoid long calls until $7.60 resistance holds. Action Alert: Fade rallies with ERIC20250815P7 until sector stabilizes.

Backtest LM Ericsson Telephone Stock Performance
Ericsson (ERIC) experienced a significant intraday plunge of -8%, but the subsequent performance varied across different time frames:1. Short-Term Rebound: Following the initial drop, ERIC showed a notable rebound in the same trading session, with a closing decline of only 0.25% to $8.02. This suggests a strong buying pressure that helped the stock recover from the initial shock.2. Long-Term Performance: In the longer term, ERIC's stock continued to trade near its 52-week high of $8.99, indicating resilience and investor confidence. The conclusion is that while ERIC experienced a substantial intraday plunge, the subsequent performance was influenced by various factors, including a strong market rebound, resilience in the stock price, and positive financial results and strategic initiatives. These factors contributed to a recovery in the short term and maintained investor confidence in the long term.

Ericsson’s Crossroads—Tariffs or Tech Turn the Tide
Ericsson’s fate hinges on resolving tariff disputes and proving 5G/6G resilience. Near-term resistance at $7.60 and support at $7.20 define the battleground, with Cisco’s (CSCO) -0.8% dip underscoring sector fragility. Investors should monitor tariff negotiations and Ericsson’s Q3 margin trends—any rebound above $8.35 (30-day MA) would signal technical relief. For now, the path of least resistance remains lower until systemic risks abate. Watch for U.S.-EU tariff truce talks or a $7.20 breakout to confirm a bottom.