AT&T
stock was lower Friday after a
J.P. Morgan
analyst downgraded it on concerns over the telecom company’s wireless growth and potential liability for lead-sheathed cables.
Analyst Philip Cusick lowered his rating of
AT&T
(ticker: T) to Neutral from Overweight and cut his price target to $17 from $22.
The stock was off 4.2% to $14.49 and was on pace for its lowest close since May 1994. The stock has declined 21% this year.
“We worry that the repeated downward revisions for its key wireless and fiber growth businesses, the high interest rate environment, and new uncertainty regarding lead sheathed cables will limit any substantial rebound,” Cusick wrote in a research note.
AT&T
didn’t immediately respond to a Barron’s request for comment.
In June, the company said it expects to report slightly more than 300,000 second-quarter postpaid phone net additions. The number, down from 424,000 net additions in the first quarter, follows “deliberate decisions to not pursue business with an uneconomic return profile,” and “temporary impacts from competitor product launches,” the company said at the time.
The uncertainty surrounding lead-sheathed cables stems from a series of articles in The Wall Street Journal. Telecom companies have network cables nationwide that are covered in potentially toxic lead, the outlet reported.
Verizon Communications
(VZ) stock also was falling, down 1.5% on Friday. Shares have declined for seven consecutive days, down 9% over the period. If the stock closes at these levels, it will be its longest losing streak since June 2022 and worst seven-day stretch since July 2022.
AT&T on Thursday referred Barron’s to USTelecom, an industry group, to comment on the Journal’s findings. “The U.S. telecommunications industry stands ready to engage constructively on this issue,” USTelecom wrote in an email.
Analysts still have concerns, despite the stock trading at 6.2 times forward earnings, which is lower than its historical average of 8.6 times. The company also offers a quarterly dividend of 28 cents a share, which is an annual yield of close to 8%.
“We see the potential liability as an unquantifiable, long- term overhang for the stock, which adds to the risk premium and drives much of our price target reduction,” Cusick said.
Write to Angela Palumbo at [email protected]
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