UBS downgraded AT&T (T) to neutral, saying it expects earnings growth will slow as wireless competition intensifies amid the launch of Apple's (AAPL) iPhone 7 and Comcast's (CMCSA) mid-2017 entry into the market.
AT&T stock, which had been trying to regain its 50-day line, fell 1.5%, to 40.85, in the stock market today.
UBS analyst John Hodulik downgraded AT&T stock to neutral from buy and lowered his price target to 43 from 46. Hodulik lowered his EPS estimates by 3% to$2.84 in 2016 and $3.02 in 2017.
With T-Mobile US (TMUS) and Sprint (S) pushing unlimited data offers, Hodulik estimated AT&T will again lose postpaid subscribers in Q3 and Q4.
AT&T, for its part, plans to launch new mobile video products in the fall, using programming from its DirecTV business.
"With the launch of AT&T's new OTT products on the horizon, we think intensity could ramp even further as AT&T looks to stem subscriber losses with its converged offerings," said Hodulik in his research report.
IBD'S TAKE: AT&T and Verizon Communications, which pay attractive dividends, were among the top large-cap performers in the first half of 2016 but weakened recently amid an uncertain outlook for rate hikes by the Federal Reserve. Learn more at IBD Stock Checkup.
Comcast last week said it plans to launch wireless services in mid-2017 under a network leasing deal with Verizon Communications (VZ). Whether Comcast later acquires a wireless firm, such as T-Mobile, could depend on the success of AT&T's over-the-top (OTT) internet video products, analysts say.
"New initiatives by the cable industry will make it increasingly difficult to turn traditional video and broadband trends on the wireline side, while competitive developments in wireless suggest the same for postpaid phone adds," Hodulik wrote.
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