AG Edwards Downgrades Qwest

Analyst Anthony Ferrugia says a potential all-stock deal by the teleco to buy MCI is priced into its shares

AG Edwards downgrades Qwest Communications (Q ) to sell from hold.

Analyst Anthony Ferrugia says he is downgrading Qwest on price appreciation sparked by the prospective merger with MCI.

He notes it's difficult to precisely quantify what a deal may look like since valuations currently being driven by leaks and rumors.

But he adds, given Qwest's equity market cap of $6 billion with Qwest stock trading in the $3.30 range before November 2004, MCIP's equity market cap of $5.5 billion with MCI stock in the $17 trading range over same time period, he believes that even with generous synergy assumption, an all-stock deal by Qwest to buy MCI is more than priced into Qwest shares.

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