Verizon Communications shares dipped more than 3% Thursday after MoffettNathanson downgraded the stock to "underperform" from "market perform," and lowered his 12-month price target on the stock to $41 from $55 each, adding that the company is losing ground to lower pricing from AT&T, better 5G networks from T-Mobile, and the increasing threat of cable wireless.
Verizon stock was priced as low as $43.91 in early trading August 18, down 3.2% or $1.13 per share, after MoffettNathanson senior analyst Craig Moffett wrote that two years after AT&T started its aggressive pricing strategy, Verizon has "seesawed between periods of promotionality and financial restraint, optimizing neither. They have recently pulled back sharply on promotions, a reversal of their approach in Q2, and have introduced a suite of lower priced plans instead. There are no easy answers."
Verizon shares closed at $44.19 each on August 18, down 2.5% or $1.15 per share.
At the same time, Verizon appears to be losing the battle with T-Mobile, which still has the lowest pricing in the industry despite spending heavily to build out its 5G network. T-Mobile now has the largest 5G network in the country, a crown that used to be worn by Verizon.
Adding to the pressure is the emergence of cable wireless. Moffett noted that Comcast, Charter Communications and Altice USA added a combined 694,000 wireless customers in Q2, about 100,000 customers more than in the same period last year. Cable now accounts for more than 9 million wireless customers, still only about 3% of the market, but it is growing. And recently Cox Communications said it was beta testing its own wireless MVNO, which Moffett wrote "will only add to the pressure on the incumbents."
Moffett's outlook isn't much better for AT&T. While the analyst maintained his "market perform" rating on the stock, he lowered his 12-month price target to $17 per share from $19 because of lower growth expectations. But Moffett raised his price target on T-Mobile to $174 each from $165, citing its strong growth prospects. ■
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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.