Phone companies AT&T and Verizon took it on the chin today after Stanford Bernstein Research analyst Craig "I love cable companies" Moffett downgraded the stocks. It would have been much more surprising if Mr. Moffett had upgraded them.
Around 1:30 PM, shares of AT&T had dropped by 4 percent, while Verizon was down 7 percent on the status change. Moffett moved AT&T to a "neutral" and Verizon to an "underperform" recommendation, and he issued his pronouncements by saying both companies had to deal with the economic downturn (Who doesn't? WalMart and McDonalds are the only companies that seem recession-proof) and a predicted slowdown in wireless and enterprise business.
Coming into today, AT&T and Verizon had gained nearly 5 percent and 10 percent respectively since October. Investors have loved the dividend yields of between 5 and 6 percent for both stocks, but Moffett feels that since the dollar is now uncertain to less favorable, those same investors will view "lack of geographic diversification" as a "headwind."
More careful readers should note that Moffitt is a long-time proponent of cable stocks and has no great-great love for the investments Verizon has made in FiOS. Cablevision's PR people have been quick to quote Moffitt, since he has been bullish on the company's stock. From a more historical perspective, this reporter is reminded of the authority Wall Street gave to Henry Blodget's pronouncements during the dot.com era.
For more:
- Wall Street Journal blogs on the stock slap.
- Some backstories on Cable Guy Moffitt. Article and Article.
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