MoffettNathanson Lowers Prices Targets for AT&T, Verizon

MoffettNathanson downgraded Verizon to “underperform” Thursday, with a revised price target of $41, down from $55. It also lowered its target on AT&T from $19 to $17, warning that tough times are ahead for two of the three major U.S. wireless carriers due to continuing pressure from cable wireless. “It has now been more than two years since AT&T adopted its aggressively promotional stance in wireless,” analyst Craig Moffett told investors: “Things have played out pretty much as one would have expected. AT&T has accelerated its subscriber growth, but at the cost of repeatedly cutting their free cash flow and dividend coverage forecasts. They are left with a larger, but arguably lower quality, customer base whose preservation is more dependent than ever on lucrative giveaways.” But the “biggest loser” has been Verizon, he said. “They have seesawed between periods of promotionality and financial restraint, optimizing neither,” he said. “They have recently pulled back sharply on promotions, a reversal of their approach in Q2, and have introduced a suite of lower priced plans instead. There are no easy answers.”