AT&T
snagged an upgrade from MoffettNathanson on Tuesday, but the team of analysts is hardly upbeat on the stock or telecoms in general.
MoffettNathanson lifted their rating on shares of
AT&T
(ticker: T) to Market Perform from Underperform on Tuesday, but it’s all about stock action rather than fundamentals.
The company “has now overshot our target price, and we do not believe a further cut to our target price is warranted,” Craig Moffett and his fellow analysts wrote, maintaining a $17 price target on shares. The stock gained 1.8% to $15.67 on Tuesday.
After a solid 2022 for the sector, investors have watched telecoms underperform the
S&P 500
this year—specifically over the last three months—analysts noted, “and AT&T has led the way down.”
So far this year, AT&T shares have shed 15%, while
Verizon Communications
(VZ) lost 12%, and
T-Mobile
(TMUS) slid 7.8%. In comparison, the S&P 500 has gained 12%.
“We continue to be cautious about wireless industry prospects. But so is the market,” Moffett and team wrote. “The sharp declines in stock prices for all of the Big Three, and for AT&T in particular, reflect an appropriately sober view.”
AT&T stock took a significant hit on April 20 after the company’s first-quarter earnings showed slower subscriber growth, the analysts noted. Shares lost 10% that day, their largest decline in more than 20 years, according to Dow Jones Market Data.
In addition, the threat of competition has shaken telecom stocks. The analysts highlighted last week’s decline in sector shares on reports that
Amazon.com
(AMZN) was in talks with several telecoms to possibly offer low-cost, or even free, nationwide mobile phone service to Prime subscribers.
And while AT&T was reluctantly handed an upgrade, MoffettNathanson maintained Market Perform ratings on Verizon and
T-Mobile,
but lowered price targets to $40 from $42 and to $172 from $181, respectively.
Verizon stock rose 0.3% to $34.68, while T-Mobile shares slid 2.5% to $128.88 in recent Tuesday trading.
On a more positive note, it seems there has been a decline in “competitive intensity among the operators recently,” analysts added, pointing to Verizon and T-Mobile dropping their device promotions for entry-level plans. Meanwhile, AT&T has continued its promotions.
Trimming promotions drives more dollars in revenue and profitability, the analysts explained. “They also tend to signal that the carriers involved feel sufficiently comfortable with their subscriber trajectories that they can pull back on discounting,” they added.
Perhaps that is the sunshine behind the clouds for the sector.
Write to Emily Dattilo at [email protected]
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