As Ericsson Rallies, Nokia Could Be Next

Ericsson (NASDAQ:ERIC) rallied a solid 12% in the last month fueled by its latest earnings report. The company reported growth from 5G. This result is reminiscent of Nokia (NYSE:NOK) in its last quarter. The Finnish telecom supplier rallied close to $5.80 only to give up the gains and to find support at the double bottom at $4.80.

Ericsson’s report of strong 5G demand gave management the confidence it needed to raise its outlook. In the third quarter, sales rose 6% (3% after currency adjustments). North America and Northeast Asia drove growth. Metropolitan areas are driving 5G installations. Ericsson will clearly benefit from the innovation moving forward in IoT and industrial. These markets need fast low-latency 5G connections. And as companies build more solutions that demand 5G, Ericsson will win more deals.

Nokia stock closed at the top end of its $4.80 – $5.20 range. Its earnings report on October 24 after the market closes could send the stock above that top-end trading range. But Nokia’s quarterly results are erratic. It does not always beat expectations. Still, Ericsson’s report of faster than anticipated 5G rollout suggests Nokia’s customers will increase orders.

Nokia has a lower valuation, trading at 13 times forward earnings. Ericsson trades at 18 times. Should ERIC shareholders lock in profits, they may switch and buy NOK stock to play the post-earnings rally.