AT&T shares continued their slide on Friday after Barclays Group media and telecom analyst Kannan Venkateshwar lowered his rating on the stock, claiming that management’s decision to reduce free cash flow guidance could call the company’s credibility into question.
AT&T shares fell for the second day in a row, dipping as low as $18.30 per share, down 3.3% or 62 cents each. In the past three weeks the stock has fallen about 13% from $21.03 on July 1.
AT&T said on Thursday that it expected to report full year free cash flow guidance of about $14 billion, instead of the $16 billion it had previously predicted, mainly due to heavier investment for growth. But Venkateshwar, in a research note Friday, wasn’t buying it.
The analyst, who lowered his rating on the shares from “overweight” to “equal weight,” pointed to the fact that AT&T’s full-year mobility EBITDA growth guidance hadn’t changed despite higher and unit pricing growth and an increase in service revenue growth guidance of between $700 million and $800 million for the year. In addition, Venkateshwar wrote that forward commentary regarding 2023 cash flow was “squishy” and could make visibility worse if the economy were thrown into a recession.
“This backdrop isn't helpful when the biggest pushback against AT&T has been execution credibility and now the company has cut guidance within 4 months of giving it,” Venkateshwar wrote. “Overall therefore, after a couple of years of trying to change the narrative, AT&T seems to be back in the same place that it started with respect to concerns about its dividend sustainability and management credibility.” ■
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Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.