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Increased competition and cable exposure could spell bad news for AT & T , JPMorgan warned. Analyst Philip Cusick downgraded the telecommunication stock to neutral from overweight and lowered his price target by $5 to $17. Still, his price target still implies shares could rally 12.4% in the next year. “We worry that the repeated downward revisions for its key wireless and fiber growth businesses, the high interest rate environment, and new uncertainty regarding lead sheathed cables will limit any substantial rebound,” he said in a note to clients Friday. AT & T is likely facing more pressure in its mobility business from Verizon, T-Mobile and cable providers as the postpaid phone business normalizes. The consumer wireless is also seeing increased competition from cable and fixed wireless access providers, Cusick said. He lowered estimates for wireless in May and June and broadband in June following management commentary. Amid these challenges, AT & T is trading at a record low valuation of 5.6 times 2023 EBITDA and has a 7.3% dividend yield, Cusick said. But he said the lowered expectations for wireless and fiber businesses and high-rate interest environment, in addition to environmental concerns, would limit how much shares can rebound. The stock has dropped nearly 18% this year. Shares slid 1.7% before the bell on Friday following the downgrade. T YTD mountain AT & T, year to date Telecommunication cables have been placed in the spotlight following a Wall Street Journal investigation. Thousands of lead cables were left behind and can create a health risk, The Journal found. While Cusick has been unable to calculate a potential liability, he said AT & T is likely has the most of these cables because of its large local exchange carrier business and long-haul network. And he said the issue could be an “overhang” or the stock, increasing the risk premium and a main reason why Cusick cut his price target for shares. When looking at other service providers, Cusick said he likes T-Mobile given its strong financials, improving subscriber and free cash flow numbers and share buyback opportunities. On the cable side, he said Charter is liked by the firm, which is also warming up to Comcast . Disclosure: Comcast is the parent company of NBCUniversal, which CNBC is part of. — CNBC’s Michael Bloom contributed to this report.
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