AT&T (ticker: T) stock plunged to its lowest level in nearly three decades on Friday, and its decline continued on Monday after Citigroup downgraded its rating. The downgrade was prompted by potential financial risks associated with the telecom industry’s use of lead-sheathed cables, which have recently come under scrutiny.
Citigroup analyst Michael Rollins revised AT&T’s stock rating from Buy to Neutral/High Risk in a note issued on Monday. He also lowered the target price for the stock from $22 to $16. As a result, AT&T’s stock fell by 4% to trade at $13.93 on Monday, following a 4.1% drop to $14.50 on Friday, which marked its lowest closing price since 1994.
The Wall Street Journal published an investigation on July 9 revealing that AT&T, along with Verizon (VZ) and other telecom giants, possess an extensive network of cables covered in toxic lead spread across the United States. These lead-covered cables, found on poles, in soil, and even in water, pose potential health risks to workers and communities residing in their vicinity.
While the financial implications for wireline telecommunications companies due to these concerns remain uncertain, Citi’s Rollins expressed apprehension about potential near-term downside risk and considered the uncertainty surrounding the issue as a burden for the time being.
AT&T has not yet responded to Barron’s request for comment. However, the company stated in response to The Wall Street Journal’s investigation that it does not believe its cables pose a public-health hazard or a significant contributor to environmental lead levels, considering other lead sources closer to residential areas.
The Centers for Disease Control and Prevention have established that lead exposure can harm the brain and nervous system, particularly in children, leading to impaired growth and development.
Citi analysts also downgraded Frontier Communications (FYBR) and Telephone & Data Systems (TDS) to Neutral/High Risk from Buy ratings in the same note. This comes after J.P. Morgan analyst Philip Cusick lowered his rating on AT&T’s stock on Friday, citing potential liability associated with lead-sheathed cables as one of his reasons. Cusick also revised his price target from $22 to $17.
In summary, AT&T’s stock has reached its lowest point in nearly three decades following a series of downgrades, primarily driven by concerns surrounding the company’s use of lead-sheathed cables and the potential financial risks associated with it.