Ericsson stock price hits a 5-year high on new lucrative 5G contracts

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Jun 6, 2020
  • Bell Canada chooses Ericsson for supply of 5G infrastructure, despite previous ties to China's Huawei
  • Canada's Telus and Germany's Telefónica Deutschland also opted for Ericsson
  • Ericsson stock price hits 5-year high, closing the week above the critical resistance

Shares of Ericsson (STO: ERIC) closed the week 4.5% higher after the Swedish telecom-equipment maker managed to secure four lucrative 5G contracts in Canada and Germany. The latest surge pushed the price action to hit a new 5-year high above the 100.00 handle.

Fundamental analysis: Ericsson raising its game against Huawei

Ericsson has made further gains this week after it was revealed that it secured a contract with Bell Canada. Ericsson had recently signed a 5G contract with one of Canada’s largest wireless carriers, Rogers Communications.

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The Canadian telecom opted for Ericsson in the end despite using Huawei’s 4G infrastructure in the past. The decision to change the provider of 5G infrastructure came after the United States raised security concerns about China’s Huawei. Analysts believe that dismantling Huawei equipment is likely to cost Bell Canada around $200 million over the next few years.

“Bell’s 5G strategy supports our goal to advance how Canadians connect and the world, and Ericsson’s innovative 5G network products and experience on the global stage will be key to our rollout of this game-changing mobile technology across Canada,” said Mirko Bibic, president and CEO of Bell’s parent BCE Inc.

In addition, Ericsson and Finland-based Nokia were selected by Telus to deploy 5G services across its network. Telus and Bell Canada are the biggest telecom companies in Canada. Similar to Bell Canada, Telus previously intended to sign with Huawei.

In addition to Canada, Ericsson won a major contract in Germany after Telefónica Deutschland opted for the Swedish telecom-equipment maker. Telefónica Deutschland, which operates under the O2 brand in Germany, will use Ericsson’s dual-mode 5G Core. 

“The partnership between Telefónica and Ericsson in the 5G core network underlines that all three German mobile network operators rely on us in different parts of their networks,” said Stefan Koetz, Head of Customer Unit Western Europe at Ericsson.

It is believed that Ericsson secured more than 90 5G contracts so far.

Technical analysis: A fresh 5-year high

A series of positive developments has directly contributed to Ericsson stock hitting a new 5-year high. Shares of the company hit the 100.00 handle for the first time since 2015. Less than three months ago, Ericsson stock price traded below 65.00.

Ericsson stock weekly chart (TradingView)

The stock price managed to secure a close above 96.50, which is critical for the future price movements. This level had been a multi-year resistance for the stock, and will now act as support. On the upside, the next target for the buyers is 105.00.

Shares of Ericsson now trade around 20% higher since Invezz included the stock in one of the five 5G stocks to invest in for 2020.

Summary

Shares of Swedish telecom-equipment maker Ericsson hit a fresh 5-year high above 100.00 after the company secured a series of lucrative 5G contracts in Canada and Germany.

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