Ericsson (ERIC) has announced itself in the 5G space, and the stock is finally responding.
The company recently showcased Ericsson Open Labs, which focuses on 5G Radio Access Network (RAN) technologies. This is a push deeper into the 5G space, an area that ERIC already operates in as a vendor. Using a Cloud RAN to add flexibility looks intriguing.
Ericsson will report earnings in two weeks. While we've seen consistency, growth could be more attractive on the top line. I would expect amid a bump in research and development costs with the push in 5G rollout, top-line growth will be needed to continue bottom-line increases. Although not a huge dividend, ERIC does offer about a 1.5% yield with capital appreciation potential at reasonable valuation metrics.
The stock is up 17% year to date, but appears to be just breaking out when viewed on a weekly basis. Ignoring the January spike when the shares got caught up in the short-squeeze frenzy, ERIC is breaking higher from a two-month consolidation pattern this week. Why can we ignore that spike? I seriously doubt any of those folks still hold the stock, so I'm not concerned about them as breakeven sellers.
The turn higher in the Full Stochastics and StochRSI last week ahead of a price breakout confirms a bullish divergence follow-through. There's not much standing in the way of a push to $15.
The 5G space has lacked clear winners thus far. Smaller names have popped, then struggled. Bigger names are somewhat too spread out with all their various revenue streams. China-based companies will be in play here but I think many Western Hemisphere and European countries will want involvement on the 5G product and service side outside of China. That's where ERIC will come into play.
As we head into the end of the week, ERIC sets up as a buy if it can maintain a level of about $13.75. Some may target $13.50. I prefer strength and a clean breakout. The $13.50 level is barely a breakout.
We can be picky here with the market continuing to act strong. Keep this one on the ready for entry Friday for a swing trade over the next six weeks minimally.