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AT&T stock is down 21% this year.
Brandon Bell/Getty Images
AT&T
the stock was down on Friday after
JP Morgan
the analyst downgraded it due to concerns about the telecommunications company’s wireless growth and potential liability for lead-sheathed cables.
Analyst Philip Cusick downgraded his rating from
AT&T
(symbol: T) to Neutral from Overweight and reduced its price target to $17 from $22.
As of midday, the shares were down 4.1% at $14.49 and were on course to close their lowest level since May 1994. The stock is down 21% this year.
“We are concerned that repeated downgrades to its core wireless and fiber growth businesses, the high interest rate environment and new uncertainty over lead-sheathed cables will limit any substantial rebound,” wrote Cusick in a research note.
AT&T
did not immediately respond to a Barrons request for comment.
In June, the company said it expected to report just over 300,000 postpaid phone network additions in the second quarter. The number, down from 424,000 net additions in the first quarter, follows “deliberate decisions not to pursue business with an uneconomic return profile” and “temporary impacts from competitive product launches”, the company said at the time.
The uncertainty surrounding lead-sheathed cables stems from a series of Wall Street Journal articles. Telecom companies have network cables across the country that are coated in potentially toxic lead, the outlet reported.
On Thursday, AT&T mentioned Barrons to USTelecom, an industry group, to comment on the Journal’s findings. “The U.S. telecommunications industry stands ready to constructively engage on this issue,” USTelecom wrote in an email.
Analysts still have concerns, despite the stock trading at 6.2 times forward earnings, which is below its historical average of 8.6 times. The company also offers a quarterly dividend of 28 cents per share, an annual yield of almost 8%.
“We view the potential liability as an unquantifiable long-term overhang for the stock, which adds to the risk premium and drives a large portion of our price reduction target,” Cusick said.
Write to Angela Palumbo at angela.palumbo@dowjones.com