JP Morgan downgraded AT&T (T) on Friday to a neutral rating amid concerns competition will continue to slow growth and uncertainty over lead-sheathed cables installed by U.S. telecom companies. Continuing its 2023 slide, T stock dipped on the news.
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JP Morgan analyst Philip Cusick cited a high interest rate environment that could give investors alternatives to the high-dividend paying stock. Cusick lowered his price target on T stock to 17 from 22.
“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 note to clients.
The Wall Street Journal reported telecom companies installed potentially dangerous lead-covered cables overhead on poles, in soil and under water for decades. They may need to take steps to make areas environmentally safe, the Journal said.
In addition, second-quarter earnings for T stock are due July 26. Further, AT&T recently lowered expectations for postpaid phone subscriber additions.
On the stock market today, AT&T stock dipped 1% to 16.96.
S&P 500 Outperforms T Stock
In 2023, T stock has shed 17%. The S&P 500, meanwhile, has gained nearly 18%.
AT&T’s free cash flow growth is key since it supports the telecom’s dividend. For fiscal 2023, AT&T predicts free cash flow of $16 billion.
AT&T stock holds a Relative Strength Rating of only 12 out of a best-possible 99, according to IBD Stock Checkup. Further, the best stocks tend to have an RS rating of 80 or better.
In terms of institutional ownership, T stock owns an Accumulation/Distribution Rating of E.
The rating runs from a best-possible A+ to a worst-possible E. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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