© Reuters. Risk-reward analysis prompts Morgan Stanley to cut AT&T (T), upgrade Verizon (VZ)
By Senad Karaahmetovic
Morgan Stanley analysts made two rating changes in the firm’s research coverage of telecom stocks. The analysts upgraded Verizon (NYSE:) stock to Overweight from Equal Weight with a price target raised to $44 per share (from $41).
“Following significant underperformance in ’22, VZ trades at a historically attractive valuation on an absolute and relative basis. We see room for improved operational performance in ’23 and FCF ramping 45% by ’24,” they said in a client note.
On the other hand, the analysts downgraded AT&T (NYSE:) stock to Equal Weight from Overweight after a “sustained outperformance in 2022,” which makes risk-reward from current levels less attractive, especially when compared to Verizon.
“While solid execution continues, we expect slowing growth in 2023 on more difficult wireless KPI comps, while secular pressures in wireline continue,” the analysts added in a separate note.
They see upside potential of about 17% and 6% in Verizon and AT&T shares, respectively.
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