Why Oppenheimer Now Prefers CenturyLink Over AT&T
Investors look through various research reports to find new value in many different forms. In this case one key analyst firm is making a large shift and announcing its change in preference.
Investors look through various research reports to find new value in many different forms. In this case one key analyst firm is making a large shift and announcing its change in preference.
It turns out that Oppenheimer has decided to make a key upgrade and downgrade in November. CenturyLink Inc. (NYSE: CTL) was upgraded, while telecom giant AT&T Inc. (NYSE: T) was downgraded. AT&T has outperformed the markets for the year thus far, but Oppenheimer sees a shift in the winds and CenturyLink may be more valuable going forward.
AT&T was downgraded to Perform from Outperform at Oppenheimer while CenturyLink was raised to Outperform from Perform with a $30 price target (versus a $23.32 prior close). As a reminder, the CenturyLink and Level 3 merger may have destroyed their charts long term.
Oppenheimer’s Timothy Horan commented on the move:
We are upgrading CenturyLink to Outperform from Perform with a $30 price target as we believe the sell-off (-24%) in shares after the announcement of the proposed acquisition of Level 3 as well as its 3Q earnings is more than overdone. Negative investor sentiment overlooks the positive aspects of combining the two companies, in our view.
We are downgrading AT&T from Outperform to Perform and removing our $46 price target as we believe CenturyLink’s dividend is relatively more attractive (which on a pro forma basis will be at a 9% yield/68% payout ratio to free cash flow, vs. 5% and 60% for AT&T); we also see the Time Warner merger as facing higher regulatory hurdles and taking more like 15 months to complete vs. 9 for CenturyLink/Level 3. AT&T is also facing some wireless headwinds in the next year.
Shares of AT&T were last seen at $37.02 on Tuesday, with a consensus analyst price target of $41.23 and a 52-week trading range of $32.22 to $43.89.
CenturyLink shares traded up over 3% at $24.11. The consensus price target is $28.20, and the 52-week range is $21.94 to $33.45.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
