Bear Stearns downgraded AT&T (T ) to peer perform from outperform.
Late Thursday, the long-distance carrier warned that it now expects weaker business-services revenue in fiscal 2004, due to competition. Analyst Robert Fagin says the pricing environment has deteriorated precipitously in the last quarter due to more competition, which is driven by vendors aside from MCI, such as Sprint and SBC Communications, which are targeting larger businesses. Intensified competition has dashed hopes that MCI's emergence would stabilize the pricing environment. Additionally, an economy-related recovery has yet to materialize, Fagin says.
Thus, despite his belief that AT&T could be valued as high as $23 to $24, he doesn't think the stock will outperform the telecom group until either the economy, pricing, or both show clear evidence of improvement. He doesn't expect this turnaround until at least the second half of 2004. Fagin cut the $1.55 2004 earnings per share estimate to $1.4