The global health crisis has made things very difficult for AT&T Inc., and its media division is likewise feeling the pinch of extreme headwinds, dragging the company's stocks down.
The Dallas conglomerate was slapped by J.P. Morgan with a cut from "overweight" to "neutral" on rising risks around Covid-19. While the dividend of AT&T appears to be in one solid piece, other parts of the narrative do not look as promising.
"We see a possibility of further downside to media results," J.P. Morgan strategists noted. J.P. Morgan market analyst Philip Cusick pointed out that while he thinks AT&T's 7.2 percent dividend yield is secure, he has other market concerns.
Because of lack of live sports, Cusick sees a threat to the company's media unit as a result of uncertainty regarding advertisement spending as well as rating problems for TBS and TNT.
After announcing the suspension of its $4 billion buyback program, AT&T Inc continued to see its stock price plunge. A group of analysts including UBS, Raymond James and Cowen have downgraded the company's stock, as well.
However, the core telecommunications sector of the group remains solid and it is on the verge of starting its streaming service HBO Max, which could offer a huge relief at a time when a big portion of the globe is in a lockdown.
At the bright side, its incremental rollout of 5G technology across the United States, combined with its ability to provide bundled deals unlike any of its rivals, gives AT&T a unique advantage.
Cusick was once positive about AT&T's potential to gain share in the streaming world with the expected launch of its HBO Max in May, but now argues that the service would enter into a slower wireless market and make the product less appealing.
Analyst Frank Louthan expressed worry about the media industry in another new note - and potential video subscription declines as the situation lengthens.
"We now think the virus will have a greater effect on WarnerMedia," Louthan wrote, adding they are also trimming sales for both AT&T and Verizon for wireless service.
Other analysts still believe there are salable assets at the firm, but it seems short-sighted to unload them in a struggling market. In pre market sessions on Wednesday, AT&T shares are down 3.6 percent. In the past month, they retreated 20 percent while the S&P 500 SPX fell 16 percent.
