AT&T cut at JPM as it faces marginally more pressure and ‘unquantifiable, long-term overhang’

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In a note to clients, JPM analysts told investors there are slowing growth drivers and an overhang from potential lead liability.

“Based on recent commentary from management lowering estimates for wireless (in May and again in June) and broadband (in June), we believe AT&T is facing marginally more pressure in Mobility (from Verizon, T-Mobile, and cable) and Consumer Wireline (from cable, FWA) as well as ongoing pressures in Business Wireline,” said the analysts.

They wrote that although AT&T shares are trading at a record-low valuation of 5.6x 2023 EBITDA with a 7.3% dividend yield, they 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.

JPMorgan sees the lead-sheathed cables’ potential liability as an “unquantifiable, long-term overhang for the stock, which adds to the risk premium” and drives much of the price target reduction.