A Citi Investment Research analyst lowered his outlook on the telecommunications services sector, citing slower growth in several key areas and an overall weaker economy.
Michael Rollins said he now expects sectorwide revenue to grow 3 percent rather than 4 percent over the next four years.
Rollins said key areas of growth for telecommunications services companies, such as wireless and broadband, have reached maturity, while a weaker economy is weighing on other segments.
The analyst made several changes to his estimates on companies in the sector: He cut his earnings estimates on AT&T Inc., saying he expects margins to be weaker. He cut his price target to $37 from $39 and maintained his "Hold" rating.
In addition, Rollins said shares of Verizon Communications Inc. would outperform AT&T, predicting margin expansion and better performance from its high-speed Internet services. He rates Verizon "Buy."
Meanwhile, he downgraded shares of Level 3 Communications Inc. to "Sell" from "Hold," saying he prefers shares of TW Telecom Inc. and Equinix Inc.
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