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Bernstein Research said it expects slower wireless growth and a "relatively worse" wireline telecom performance in 2009, while cutting its ratings on telecommunication giants Verizon Communications and AT&T.
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The brokerage downgraded Verizon [VZ
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] to "underperform" from "market perform" and AT&T [T
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] to "market perform" from "outperform."
"We believe the TelCo stocks have come too far, too fast. With strong Q4 outperformance, the sector has traded as a strong defensive/staple. But the sector is more appropriately viewed as a late-stage cyclical, in our view," analyst Craig Moffett wrote in a note to clients.
Moffett said the wireless communication market was now approaching saturation and coupled with lower subscription due to the recession, the sector may witness a sharp slowdown.
"AT&T and Verizon may indeed be somewhat more recession-resistant than most business. But we believe they are nevertheless much more cyclically exposed than consensus estimates (and valuations) would suggest," said Moffett, who cut his price target on AT&T to $27 from $35 and on Verizon to $27 from $32.
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