Barclays downgraded shares of AT&T to equal weight from overweight on Wednesday, advising clients to move to the sidelines as a lengthy regulatory approval process for the proposed $85 billion merger deal with Time Warner is likely to weigh on the shares.
"Shareholders will need to patiently wade through an extensive review process and ongoing competitive pressures. Against this backdrop, multiple expansion seems less likely," wrote equity analyst Amir Rozwadowski in a research note.
"While the financial benefits are sound (i.e. earnings and FCF [free cash flow] accretion yielding improved dividend coverage), proof points of its revenue synergy focused strategy will take time to materialize," he added.
Since reaching a 52-week high of $43.89 in July, shares of AT&T are down nearly 17 percent on the back of tepid earnings and what Barclay's calls a "bold move" to acquire Time Warner. Separately, the bank upgraded Time Warner shares Wednesday.