By Chibuike Oguh
NEW YORK (Reuters) – Shares of AT&T Inc fell more than 5% to their lowest level in 30 years on Monday, after analysts downgraded the stock following a report that the giant of telecommunications would have left toxic lead cables buried across the United States.
A July 9 Wall Street Journal report named AT&T and Verizon among several telecom giants that abandoned a sprawling network of toxic lead cables underground, many of which may be contaminating nearby soil and drinking water sources. .
Analysts at Citigroup and JPMorgan have both lowered their recommendations on AT&T shares in recent days. The stock has lost a quarter of its value so far this year, having fallen 12% since the Wall Street Journal report. Shares hit a low of $13.68 in Monday’s session, the lowest since March 1993.
AT&T faces unquantifiable financial risks that would create a “long-term overhang” for the stock since the company likely has significant exposure to toxic lead cables with its network reaching about 40% of homes in the United States, according to the Citi analysts, led by Michael Rollins, said in a note to investors.
Rollins cut his rating on AT&T stock to “neutral” from “buy” and cut his price target to $16 from $22.
On Friday, JPMorgan analysts, led by Philip Cusick, downgraded their rating on AT&T from “neutral” to “overweight,” citing concerns over repeated downgrades to key wireless and fiber growth businesses. society, the high interest rate environment and the new uncertainty over lead-sheathed cables.
“We have discussed the copper lead sheath situation with numerous industry contacts and have been unable to find a reasonable way to calculate any potential liability, but we believe AT&T will be the most exposed given its huge LEC. [local exchange carrier] in addition to owning AT&T’s original long-haul network,” JPMorgan wrote.
AT&T’s forward price-to-earnings ratio of 5.95 is below the industry median of 8.78, according to Eikon data.
Verizon shares also fell on Monday, falling 5.5% to $32.14, a nearly 13-year low. Verizon’s stock has fallen more than 10% since the Wall Street Journal report.
Morningstar analyst Michael Hodel said Friday that while “this situation is worth watching, we don’t expect the telecommunications industry to bear substantial legal liability.”
(This story has been reclassified to update the graphic and polish the title)
(Reporting by Chibuike Oguh in New York; Editing by Lance Tupper and Deepa Babington)