ERIC Fell 15% In A Month. What To Do Now?.
Telefonaktiebolaget L M Ericsson (ERIC) stock is down 15.1% in 21 trading days. History of recovery post-dips is not on your side and there is fundamental risk – specific to profitability, balance sheet and downturn resilience. Consider the following data:
- A $24 Bil company with $250 Bil in revenue currently trading at $7.20.
- Last 12 month revenue growth of -1.8% and operating margin of 4.3%.
- Has Debt to Equity ratio of 1.8 and Cash to Assets ratio of 0.2
- Currently trading at P/E multiple of 14.9 and P/EBIT multiple of 3.0
- Has one instance since 2010 where it dipped >30% in < 30 days and subsequently returned -32.7% within a year. See ERIC Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for ERIC, see Buy or Sell ERIC Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and ERIC drops another 20-30% to $5.04 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into Telefonaktiebolaget L M Ericsson (ERIC) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock has fared worse than the S&P 500 index during various economic downturns.
ERIC provides communication infrastructure, services, and software across networks, digital services, managed services, and emerging businesses, specializing in radio access network solutions with integrated hardware and software.
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- ERIC Down 10% In A Week. What Happened Next Before?
- What’s Next For Ericsson’s Stock Post Q1 Results?
- What’s Happening With Ericsson’s Stock?
- What’s Next For Ericsson Stock?
- Down 16% This Year Amid A Weak Demand In The U.S., What Lies Ahead For Ericsson Stock?
2022 Inflation Shock
- ERIC stock fell 69.6% from a high of $14.34 on 21 April 2021 to $4.36 on 27 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $8.90 on 23 January 2025 , and currently trades at $7.20
| ERIC | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -69.6% | -25.4% |
| # of Days for Full Recovery | Not Fully Recovered | 464 |
2020 Covid Pandemic
- ERIC stock fell 33.0% from a high of $9.21 on 12 February 2020 to $6.17 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 1 June 2020
| ERIC | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -33.0% | -33.9% |
| # of Days for Full Recovery | 77 | 148 |
2018 Correction
- ERIC stock fell 25.9% from a high of $10.39 on 17 April 2019 to $7.70 on 3 September 2019 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 17 July 2020
| ERIC | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -25.9% | -19.8% |
| # of Days for Full Recovery | 318 | 120 |
2008 Global Financial Crisis
- ERIC stock fell 74.0% from a high of $21.68 on 12 July 2007 to $5.64 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
| ERIC | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -74.0% | -56.8% |
| # of Days for Full Recovery | Not Fully Recovered | 1480 |
Worried that ERIC could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.