Shares of AT&T (T -1.42%) have declined today, down by 4% as of 12:10 p.m. EDT, after JPMorgan downgraded its rating on the telecommunications and media giant. Rival T-Mobile also closed its blockbuster acquisition of Sprint, creating a formidable rival.
JPMorgan analyst Philip Cusick cut his rating on the stock from overweight to neutral, while assigning a price target of $35. AT&T's yearslong expansion into media now faces considerable risks associated with the COVID-19 pandemic, which has canceled essentially all live sports events. The crisis will also make it harder for AT&T to fetch good prices for assets it is trying to divest.
Ma Bell agreed last year to divest $10 billion in assets in order to reduce debt and appease activist investor Elliott Management, which took a stake in AT&T in 2019 and started pushing for changes in order to maximize shareholder value. "We still believe there are salable assets at the company, but selling them in a weak market seems short sighted," Cusick wrote in a research note to investors.
The analyst adds that AT&T's dividend should be safe. The company canceled its buyback program last month in order to protect the payout.
Separately, Nomura analyst Jeffrey Kvaal also expressed concerns about wireless carriers yesterday, noting that telecom giants are no longer as safe from recessions as they have been historically.
Diversification into media and entertainment has made the companies more vulnerable to macroeconomic conditions, with Kvaal pointing to AT&T's WarnerMedia unit getting impacted by movie theater closures while the forthcoming HBO Max streaming service may face production delays.