Market Report -- Story Stocks (T, AWE, NXTL, NTRO, ASCX, ERICY)
October 06, 2000 2:59:00 PM ET
AT&T (T) 26 15/16 -1 15/16: Although we have written quite a bit on this stock recently, today's downgrade is noteworthy as few ratings changes receive the attention that Salomon Smith Barney analyst Jack Grubman's did this morning. While he has a strong reputation for being knowledgeable on the telecom sector which he has covered since the early 80's, he has been receiving a lot of negative attention for upgrading the stock almost a year ago at a time when AT&T was deciding which firms would underwrite its lucrative AT&T Wireless (AWE) IPO....This morning, the firm downgraded AT&T to Outperform, lowered EPS estimates and lowered the price target to $37 down from $65. The firm is basing the decision on sluggish consumer and business long distance segments, uncertainty over the structure of the company and the fact that Comcast and Cox have the right to transfer put options from Excite AtHome to AT&T....Until there is more clarity as to the future structure of the company, we would hold off on the stock at this point. It's important for AT&T to be able offer a bundled package of services which includes local, long distance, wireless, and broadband data on a single system. Therefore, the company's decision with respect to its consumer long distance division is important. If a deal cannot be structured whereby they can offer long distance services, we would be worried about the company's future....Verizon and SBC which can now offer long distance services in New York and Texas, respectively, are taking long distance business away from AT&T....There are simply better places for telecom investment dollars. We continue to like Nextel (NXTL) as inevitably the company will be bought at a premium. Also, look for a rally in the out-of-favor telecom equipment stocks. The bottom is still on the way, in our opinion. We recommend waiting for a sustained bounce before entering the group as it's better to lose 10% on the rally vs. a potential 30% drop looking for a bottom. Some telecom equipment companies we like at current levels are Netro (NTRO), Advanced Switching (ASCX), and Ericsson (ERICY). -- Robert J. Reid, Briefing.com
Briefing.com is the leading Internet provider of live market analysis for U.S. Stock, U.S. Bond, and world FX market participants. |
