Verizon (VZ) Downgraded to 'Neutral' at MoffettNathanson, AT&T (T) Maintained at 'Sell' on Less Attractive Near-Term Setup

April 27, 2021 8:28 AM EDT
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Verizon (NYSE: VZ) stock was downgraded to “Neutral” from “Buy” at MoffettNathanson as analyst Craig Moffett says the near-term setup is less attractive now.

The analyst was more bullish on VZ in the past due to the company’s ARPU growth this year and a better mid-bad spectrum position. However, he says he is “not so sure anymore,” although he still believes Verizon will post stronger ARPU growth in 2021.

“Here’s the problem: if AT&T maintains its promotional stance, Verizon and T-Mobile will feel more and more pressure to respond. Comcast, which cut wireless prices last week, already has. A period of greater competitive intensity now looks more likely. And the longer-term challenge of losing their “best network” status doesn’t feel so far away anymore. Yes, Verizon still looks cheap. But what looked like an attractive near term set up is now less clear,” the analyst wrote in a note sent to clients.

Strong ARPU growth “alone isn’t enough,” says Moffett, who also lowers the price target on VZ to $57.00 per share from $62.00. On T stock, he notes:

“We were not persuaded to change our rating on AT&T, notwithstanding a better-than-expected 1Q result. AT&T faces easier comps for the next few quarters, especially in Warner Media, but they face the same long-term challenges as Verizon,” he adds.

“On an absolute basis, Verizon is, by any measure, still operating at a higher level than AT&T, at least at the consolidated level. Verizon posted EBITDA growth of 2.0%; AT&T posted an EBITDA decline of 4.7%. But momentum is everything, and in the all-important wireless segment, it was AT&T that posted not only the better results, but also the better trajectory.”

Therefore, Moffett maintained a “Sell” rating on T with the target price unchanged at $24.00.

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