Stifel Nicolaus downgraded Qwest Communications (Q) to sell from hold, citing Monday's telecom industry news that AT&T (T) plans to buy BellSouth (BLS) for $67 billion.
Analyst Christopher King says the news sparked a run-up in other telecom stocks, such as Qwest, Sprint Nextel (S), and ALLTEL (AT), which he considers overdone. He notes that following Monday's run-up, Qwest share prices closed up nearly 83% since Sept. 15 2005. Yet he didn't hear anything yesterday from the companies that would cause him to materially change his view that a steep premium was paid for BellSouth's assets. He remains skeptical that the synergies AT&T and BellSouth are guiding to can be easily achieved. He set a $5 stock price target on Qwest.