Shares of AT&T Inc. and Verizon Communications Inc. have both been laggards this year, but Citi Research analyst Michael Rollins sees better days ahead.
Rollins said he thinks the stocks could benefit from improving conditions in the wireless market, noting that AT&T and Verizon both rolled out recent price increases. Additionally, consumers continue to hold onto their phones for longer, which stabilizes churn and reduces device-upgrade costs that the carriers have to pay.
AT&T shares are off 23% so far this year, while Verizon shares are down 15%, compared with a 15% rise for the S&P 500 SPX over the same span. The shares have come under pressure amid concerns about lead cables that were raised by Wall Street Journal reporting. “If the outcome for lead cabling is more likely in the range of immaterial to remediating the non-buried lead cabling, then we believe the stocks could recover at least one-third, if not more than one-half, of their recent market cap losses of $21 [billion],” he wrote. AT&T and Verizon shares “are trading at decade-plus lows” on the basis of firm value to earnings before interest, taxes, depreciation and amortization, while their dividend yields are at decade-plus highs.
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