Verizon unlikely to show tide towards AT&T simply but – Barclays (NYSE:T)

AT&T (NYSE:T) “flipping” the narrative between it and longtime wi-fi rival Verizon (NYSE:VZ), and whereas which means AT&T has considerably outperformed this yr, Barclays thinks that hole has room to get nonetheless wider amid Verizon’s challenges.

Verizon’s (VZ) weak point in its third-quarter report despatched the inventory close to a 12-year low, however that underperformance was largely baked into expectations, analyst Kannan Venkateshwar notes.

Nonetheless, “three quarters of shopper declines nonetheless stands out in an {industry} the place total development is working at document ranges,” and churn can also be at a multi-year excessive, pointing to the challenges of turning across the development profile.

There are contradictions in Verizon’s development technique, Venkateshwar mentioned: Gross add tendencies improved, however appeared to be pushed by the decrease $30 entry-level Welcome plan, although it raised costs throughout 75% of its buyer base, which on common is already paying the {industry}’s highest costs. (T-Cell (NASDAQ:TMUS), in the meantime, is pushing extra subs from lower-end plans to its highest-end Magenta Max plans.)

“Verizon’s core downside is satirically its previous success,” he says – and an industry-leading place in each subscriber section, together with industry-high common income per person, makes it “a simple goal for brand new entrants and its smaller telecom friends.”

“General, we consider it’s more likely to be robust for Verizon to dig out of its current challenges with tactical adjustments in technique and the corporate must re-adjust its place within the new aggressive matrix to be on a extra sustainable path,” Venkateshwar mentioned.

Nonetheless, the financial institution is not going Obese on AT&T, which it says faces {industry} development threat in addition to an absence of visibility on subsequent yr’s pricing. Each AT&T and Verizon have seen dangerous money owed return to 2019 ranges after “terribly” low ranges over the previous yr, which presents some extra margin threat, Venkateshwar notes.

And as with different analysts, he thinks traders are unlikely to wholeheartedly take part optimism on AT&T till there are concrete indicators of money circulate enchancment, “given AT&T’s monitor document.”

Barclays decreased its worth goal for Verizon (VZ) to $37 from $40 (vs. a present $35.93), and boosted its goal on AT&T (T) to $19 from $18 (now implying 9% upside).