Ericsson Earnings: Encouraging Results on Significant Improvement in a Cyclically Challenged Market

After a string of terrible quarters with declining revenue, Ericsson finally showed significant tangible improvement with its second-quarter results. We've believed that cyclical vacillations following a huge increase in customer spending have driven recent poor performance rather than secular headwinds or a deteriorating competitive position. We expect performance to remain on the uptrend and we maintain that the stock is pricing in too much pessimism relative to our SEK 92 fair value estimate.