Goldman Chops Ests On Euro Communications Tech Stks; Says Sell Ericsson, TomTom; Ups Alcatel To Buy

Goldman Sachs European telecommunications equipment analyst Tim Boddy this morning chopped estimates across the board, asserting that “recent financial turbulence greatly increased the chances of a U-shaped recession in developed markets lasting through 2010,” rather than a V-shaped recovery in 2009. In response, he cut EPS estimates on Euro telecom equipment stocks by an average 15% for this year, 18% for next year, and 16% for 2010.

Boddy says the stocks he follows are likely to continue to fall, pressured by estimate downgrades and leverage risk, with the exception of those already trading at or below historic trough valuations.

Boddy today cut his rating on Ericsson (ERIC) to Sell from Neutral, noting that he now has a 2009 EPS estimate 29% below the consensus, “due to likely declines in emerging market capex and potentially large losses at Sony Ericsson.” He also downgraded TomTom (TOM2.AS) to “Conviction Sell” from Neutral, citing slow demand for personal navigation devices and high financial leverage. Likewise, he cut Thomson (TMS) to Conviction Sell from Neutral, “as we expect another 8% drop in underlying sales in 2009,” potentially putting debt covenants at risk and creating refinancing risk.

On the other hand, Boddy upped his rating on Alcatel-Lucent (ALU) to Conviction Buy from Neutral, noting that the stock is traded at 30% below its previous trough valuation based on his below-consensus estimates.

In today’s trading:

• Alcatel Lucent is up 4 cents, or 1%, to $3.88.


• Thomson is off 17 cents, or 4.8%, to $3.37.


• Ericsson is off 47 cents, or 5%, to $8.96.


• TomTom is down 92 Euro cents, or 7.2%, to 11.88 Euros, in trading in Amsterdam.