Pressures on AT&T’s entertainment business will impact the company’s profits, according to Jefferies, which downgraded the telecommunications giant on Thursday.
“We are downgrading the stock from Buy to Hold largely on concerns related to the entertainment segment as cord shaving and spin downs continue to pressure margins,” analyst John Janedis wrote in a note to clients.
“On the Time Warner front,” he added, “we assume the deal will get approved, which could benefit the stock in the short term. However, we also think there’s risk that programming investment at both HBO and Turner will need to move higher given increased over-the-top competition, which could cap upside to the $1.5 billion of expected cost synergies.”
Janedis also cut his price target on shares of AT&T, reducing the forecast to $35 from $40 and implying 4.85 percent upside for shareholders over the next 12 months. Shares fell 0.5 percent in premarket trading following the Jefferies report, set to add to the company’s 14 percent loss so far this year.
AT&T shares were slightly lower in premarket trading Thursday.
