UPDATE: Bank of America Downgrades Cincinnati Bell to Underperform, Reiterates $3.50 PT on Comparable Wireline Valuation

In a report published Friday, Bank of America analyst David W. Barden downgraded the rating on

from Neutral to Underperform, but reiterated the $3.50 price target. In the report, Bank of America noted, “After years of operating several discrete businesses (wireline, wireless, data centers), CBB will emerge as a pure play wireline company with the close of its spectrum sale to VZ later this year. As such, we are no longer valuing the business on a SOTP basis but rather using a comparable multiple analysis for the wireline business after giving due credit for its 44% stake in CONE and wireless proceeds. Our $3.50 price objective assumes a 5.0x EBITDA multiple on the entire remaining wireline business, a $27 per share value for CyrusOne (BofAML's price objective) and includes the $210m proceeds from the sale of the wireless business. At the current stock price, CBB's shares imply the wireline business is trading at 5.3x our '15E EBITDA after backing out the projected YE ‘15 value for CONE. Our assumed wireline multiple is a discount to CBB's RLEC peer average multiple of 5.9x, which we believe is justified by the fact the company does not currently pay a dividend and is multiple years away from being in a position where this might be a possibility.” Cincinnati Bell closed on Thursday at $3.90.