AT&T and Verizon plummet for decades: Toxic lead investigation triggers Telco selloff, analysts head for exits
Shares of telecommunications giants AT&T Inc T, Verizon Communication Inc VZ, Telephone and Data Systems, Inc TDS and Frontier Communication Parent, Inc FYBR fell dramatically on Monday, losing 7% to 15%. The Wall Street Journal investigation exposing the negligence of a network of harmful lead-covered cables caused the market backlash.
In a note released Monday, Citigroup analyst Michael Rollins reviewed the situation regarding the wired network deployed by these telecommunications companies nationwide.
According to Rollins, a considerable percentage of these cables may have lead sheathing, with varying levels of exposure for each company. As a result, the analyst believes this issue will continue to impact stocks and their valuations for a few months or more until the market has a better understanding of the financial risk involved.
Rollins said gathering more information on the issue could take months and a final resolution could take years. According to Citigroup's current scenario estimate, most wireline carriers will experience a firm valuation discount ranging from 0.2x to 1.0x EBITDA.
Also read: Tesla prepares to double size of Berlin plant, aiming for 1 million electric vehicles per year< /p>
Chart: AT&T falls to February 1993 levels, Verizon to November 2010
In response to recent developments, Citigroup lowered its ratings on AT&T, Phone and Data Systems and Border Communications to Neutral/High Risk. While the price targets for these stocks have been reduced to $16, $8, and $17, respectively.
ETF which owns telecommunications operatorsThe U.S.-listed exchange-traded funds with the most exposure to AT&T are the iShares MSCI USA Value Factor VLUE ETF with a weighting of 5.1% and the iShares U.S. Telecommunications ETF ETF IYZ with a weighting of 4.2%. .
The iShares Trust - iShares U.S. Telecommunications ETF also has a significant stake in Verizon (12.4%), which is also represented by an 8.3% weighting in the First Trust Morningstar Dividend Leaders Index Fund FDL.
Frontier Communication owns 3% of SPDR S&P Telecom ETF XTL.
Response from telecom operatorsIn response to the investigation, AT&T and USTelecom, an industry group, developed websites to allay concerns about the environmental and public health implications of lead cables.
A USTelecom spokesperson pointed out that there is no evidence that old lead-sheathed telecommunications cables are a significant source of lead exposure or a problem. public health. The representative further highlighted the importance of safe work procedures in the telecommunications industry to prevent worker exposure to lead.
Now Read: AT&T Stock Is Trading Down: What's Going On?
Photo: Shutterstock
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Shares of telecommunications giants AT&T Inc T, Verizon Communication Inc VZ, Telephone and Data Systems, Inc TDS and Frontier Communication Parent, Inc FYBR fell dramatically on Monday, losing 7% to 15%. The Wall Street Journal investigation exposing the negligence of a network of harmful lead-covered cables caused the market backlash.
In a note released Monday, Citigroup analyst Michael Rollins reviewed the situation regarding the wired network deployed by these telecommunications companies nationwide.
According to Rollins, a considerable percentage of these cables may have lead sheathing, with varying levels of exposure for each company. As a result, the analyst believes this issue will continue to impact stocks and their valuations for a few months or more until the market has a better understanding of the financial risk involved.
Rollins said gathering more information on the issue could take months and a final resolution could take years. According to Citigroup's current scenario estimate, most wireline carriers will experience a firm valuation discount ranging from 0.2x to 1.0x EBITDA.
Also read: Tesla prepares to double size of Berlin plant, aiming for 1 million electric vehicles per year< /p>
Chart: AT&T falls to February 1993 levels, Verizon to November 2010
In response to recent developments, Citigroup lowered its ratings on AT&T, Phone and Data Systems and Border Communications to Neutral/High Risk. While the price targets for these stocks have been reduced to $16, $8, and $17, respectively.
ETF which owns telecommunications operatorsThe U.S.-listed exchange-traded funds with the most exposure to AT&T are the iShares MSCI USA Value Factor VLUE ETF with a weighting of 5.1% and the iShares U.S. Telecommunications ETF ETF IYZ with a weighting of 4.2%. .
The iShares Trust - iShares U.S. Telecommunications ETF also has a significant stake in Verizon (12.4%), which is also represented by an 8.3% weighting in the First Trust Morningstar Dividend Leaders Index Fund FDL.
Frontier Communication owns 3% of SPDR S&P Telecom ETF XTL.
Response from telecom operatorsIn response to the investigation, AT&T and USTelecom, an industry group, developed websites to allay concerns about the environmental and public health implications of lead cables.
A USTelecom spokesperson pointed out that there is no evidence that old lead-sheathed telecommunications cables are a significant source of lead exposure or a problem. public health. The representative further highlighted the importance of safe work procedures in the telecommunications industry to prevent worker exposure to lead.
Now Read: AT&T Stock Is Trading Down: What's Going On?
Photo: Shutterstock
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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