Pali Research Initiates Coverage of AT&T (T) with a Sell

June 18, 2009 8:10 AM EDT

Pali Research initiates coverage of AT&T (NYSE: T) with a Sell rating and a $20 price target

Pali analyst says, "As the wireless industry passes 90% penetration, growth in profitability becomes even more of a market share game demanding that investors pick winners and losers and we deem AT&T to be one of the losers. We expect its wireless post-paid net subscriber additions to drop to less than 1 million in 2010 from more than 4 million in 2008 and to turn negative in 2011. Our assessment on AT&T Wireless may prove to be too early but we believe the stock discounts changes well in advance and we believe investors may have an opportunity to sell into near term strength driven by the hyped launch of a new iPhone and a price cut for an old iPhone to $99. Our 2009 EPS estimate of $2.02 is $0.05 below consensus and we show no growth in EPS in 2010, which puts us $0.19 below consensus. However, our Q2 EPS estimate is in-line with consensus of $0.52."

"We believe there is reasonable risk that AT&T would spend north of $40.0 billion to buy DirecTV (NYSE: DTV) in order to strengthen its video offering to its customers."

To see more analyst ratings on T Click Here.

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