CIBC World Keeps Hold on Ericsson

Analyst Dale Pfau is surprised that the market is reacting so negatively to the telecom equipment firm's earnings warning

CIBC World kept its hold rating on Ericsson (ERICY ) but says it's surprised by the negative market reaction. Ericsson warned of flat to lower Q1 sales than a year ago vs. its previous expectation of 15% growth.

Analyst Dale Pfau says the news is not surprising, but he doesn't understand why the market is reacting so negatively. He notes that he downgraded Ericsson about a month ago, and says most end markets have been deteriorating significantly since January. Pfau says the handset market is falling off a cliff, and infrastructure has been sending weak signals as well. He thinks some weakness may simply be due to the weak Nasdaq and investors throwing in the towel on management. He says he will cut his estimates.