BROKERWATCH Media & internet sector cut to 'in-line' at Morgan Stanley

LONDON, Jul 24, 2008 (Thomson Financial via COMTEX) -- MS | Quote | Chart | News | PowerRating -- Morgan Stanley has cut its rating on the media and internet sector to 'in-line' from 'attractive', according to dealers, saying major companies will cut back on advertising spend.

Morgan Stanley said the macro indicators have taken a significant step down across Europe in the second quarter of 2008.

With inflation rising beyond expectations, GDP slowing down further and private consumption experiencing a sharp deceleration, major advertisers such as Procter & Gamble, Coca-Cola, Nissan and Vodafone have expressed their intentions to keep rationalising marketing spend in the near term, said the broker.

TV advertising spend shrinkage is therefore not over and could potentially take another step down in the second half, it added.

In the light of the steeper than originally forecast second-quarter ad shrinkage, it has cut EPS forecasts by 4 percent in 2008, 5.5 percent in 2009 and 4 percent in 2010 for TL5, and by 6 percent in 2008, 7 percent in 2009 and 8 percent in 2010 for A3.

Its new price target for TL5 is 7.8 euros, down from 8 euros, and 4.3 euros for A3, down from 4.7.

Despite the recent share-price bounce following the market rally, Morgan Stanley thinks notable downside remains.

M6, with an 'equal-weight' rating, remains its top pick in the sector.

brian.gorman@thomsonreuters.com btg/jlc

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