By
Temitope Olatunji
April 26th, 2024
In response to a request for comment, AT&T Inc did not provide an immediate response to debunk the hanging fears from investors and users.
AT&T Inc (NYSE: T), one of the world’s largest telecommunications companies has witnessed a significant drop in its stock value, reaching its lowest point in three decades. Shares of the company reportedly tumbled by nearly 7% on Monday, as news of its involvement in the distribution of toxic lead cables spread like wildfire.
A recent report published by The Wall Street Journal on July 9 has brought to light a disturbing revelation involving major telecommunications giants AT&T and Verizon Communications Inc (NYSE: VZ). The report names these corporations, among others, as having abandoned an enormous network of underground wires containing hazardous lead.
Implications for AT&T Stock
AT&T now faces the challenge of restoring investor confidence amidst the ongoing toxic lead cable scandal. The stock has lost a quarter of its value this year, plummeting more than 12% since the Wall Street Journal report. The stock touched a low of $13.68 on Monday, the lowest since March 1993.
AT&T’s forward Price-to-Earnings (P/E) ratio of 5.95, as reported by Eikon data, stands below the industry median of 8.78. This suggests that AT&T’s stock is trading at a lower valuation than its peers in the industry.
Notably, Verizon has also experienced a decline in its stock price, falling 5.5% to $32.14, reaching a nearly 13-year low. Since The Wall Street Journal report, Verizon’s stock has lost over 10% of its value.
Citi analysts, led by Michael Rollins highlighted in a recent investor note that AT&T’s potential significant exposure to toxic lead cables poses unquantifiable financial risks for the company, creating a long-term overhang on its stock. With its extensive network reaching about 40% of US homes, the financial implications related to environmental cleanup, remediation efforts, and legal liabilities are causes for concern.
In response to a request for comment, AT&T Inc did not provide an immediate response to debunk the hanging fears from investors and users. However, US Telecom, a lobby group representing AT&T, Verizon, and other telecoms firms, issued a statement shedding light on the considerations involved in the decision to remove or leave buried cables.
The group emphasized that there is currently no evidence indicating that “legacy lead-sheathed telecom cables” are the leading cause of lead exposure or public health issues.
Analysts Downgrade AT&T Ratings
Analyst Michael Rollins from Citigroup has downgraded his rating on the company’s stock and significantly reduced the price target. Rollins downgraded the stock from “buy” to “neutral” and slashed the price target from $22 to $16. Similarly, JPMorgan Chase & Co (NYSE: JPM) analysts, led by Philip Cusick, have joined the list of analysts downgrading their rating on AT&T Inc’s stock. The analysts lowered their rating from “overweight” to “neutral” in response to the series of concerns.
The downgraded rating by JPMorgan further underscores the growing apprehension among analysts regarding AT&T’s financial outlook and potential challenges the company may face in its core business areas.
On the other hand, Morningstar analyst Michael Hodel has commented that while the situation warrants attention, he does not expect the telecom industry to bear substantial legal liability.
Hodel’s statement reflects the belief that the potential legal consequences and financial liabilities associated with the toxic lead cables may not have a significant impact on the overall telecom industry. However, constant monitoring and assessment of the situation will be required to properly grasp the scope of any legal or financial consequences.