Goldman Cuts Estimates for Earthlink

Analyst Anthony Noto cites increased marketing spending in a fiercely competitive environment

Shares of Earthlink were down after Goldman Sachs cut its 2002 EBITDA estimate in anticipation of increased marketing in the competitive environment. Analyst Anthony Noto cut his $100M 2002 EBITDA estimate to $80M.

The analyst says the new estimate reflects a $20M increase in sales and marketing that he believes will be necessary for Earthlink to grow its subscriber base amidst fiercer competitive environment, specifically increased spending by competitors, and slowing industry growth. The analyst adds his cash flow thesis remains intact, in addition to strategic value of Earthlink's 4.8M sub base. He also cut his breakeven 2002 estimate to $0.13 loss, and cut his $19 price target for the stock to $17.