"Ericsson (NASDAQ: ERIC) has the 'Swedish blues'," jests global expert Yiannis Mostrous, noting the stock fell sharply after issuing a warning. Nevertheless, he remains bullish.
In his The Silk Road Investor, the adviser explains, "Ericsson issued a warning for its gross and operating margins for the third quarter, which fell to 35.6% (43.0% last quarter) and 12.9% (19.4% previously). Promptly, the stock tumbled 24%."
He contends, "Although this is a severe blow to the stock price, the company remains one of the long-term holdings in the global infrastructure area."
The reason? He suggests, "Wireless telecom remains one of the best long-term growth stories. The beauty is that this growth story is applicable to both developed and developing economies. Emerging markets, in particular, are important because they continue to build huge wireless networks, with China and India at the forefront."
The advisor continues, "Ericsson is the world's leading architect of mobile systems -- the premium segment in telecommunications -- and should be the big beneficiary. As for the bad numbers, they came mainly from a sudden decline in mobile network upgrades in Western Europe and North America, as well as in China, where some anticipated sales seem to have been 'pushed out' rather than canceled."
As a result, Mostrous concludes, "Ericsson will have some very challenging quarters ahead as it tries to improve performance and persuade investors that its long-term strategy is still on track. However, we plan to keep the stock in our portfolio and rate it as a long-term buy."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment commentary and favorite stocks of the nation's leading financial newsletter advisors.
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