(Reuters) – Shares in Sweden’s Ericsson extended their losses on Friday a day after a strategy update in which the telecom equipment maker said several of its more profitable markets showed signs of slowing down.
The company, one of the world’s biggest suppliers of 5G technology, told investors it would only reach the lower end of its long-term target of a 15-18% profit (EBITA) margin by 2024.
After falling 4% on Thursday, Ericsson’s shares were down another 4.2% by 1026 GMT on Friday, underperforming a 1.4% drop in the European telecom sector.
The negative share price reaction was likely driven by the fact that Ericsson expected little or no growth in mobile network markets for the next three years, said Danske Bank analyst Sami Sarkamies.
“It seems to be a shocker for some investors and then additionally, they say that they’re expecting some volatility with high margin customers in the near term, maybe over the next two to three quarters,” he said.
While the U.S. and other markets are slowing down, Ericsson said it was hoping newer markets such as India would help offset some lower demand for 5G equipment.
The company on Thursday said it was accelerating plans to cut costs by 9 billion Swedish crowns ($867 million) by the end of 2023.
($1 = 10.3750 Swedish crowns)
(Reporting by Marie Mannes; editing by Terje Solsvik and Jason Neely)
