Morgan Stanley: Wireless Wars Reinforce Cautious View, Lowers Price Target Of AT&T And Verizon

In a note on Wednesday, Simon Flannery of Morgan Stanley states that the competitive intensity seen within the wireless telecom industry is showing no signs of “flagging.” As a result, the analyst is lowering his 2015 estimates to reflect a “more cautious” view on profitability due to increased promotional activity, higher upgrades and churn rates. Flannery expects

to report a churn rate of 1.15 percent in the fourth quarter, higher than the 1.11 percent the company reported in the third quarter and higher than the 1.05 percent the analyst previously estimated. At the same time, Flannery expects

average revenue per user will fall. As such, the analyst expects Verizon to report an EBITDA of $7.945 billion, lower than the $8.39 billion previously estimated. “Going forward, our estimates reflect our concerns that, while the current promotions will end shorty, we may only be in the early innings of a wireless war,” Flannery wrote. Shares of AT&T were maintained with an Equal-weight rating with a price target lowered to $34 from a previous $36. Shares of Verizon were maintained with an Overweight rating with a price target lowered to $51 from a previous $54.