With limited upside to the price target and several fundamental headwinds expected to increase in 2017, Deutsche Bank’s Matthew Niknam believes that the risk/reward on AT&T Inc. (NYSE: T) is more balanced at the current levels.

Niknam downgraded the rating on the company from Buy to Hold, while lowering the price target from $44 to $43.

“While we continue to believe AT&T's scale and low-cost profile remains a key strategic differentiator vs. peers, we nonetheless note this is our third downward estimate revision since October; our 2017/2018 forecasts are now all 1 percent below the street,” the analyst mentioned.

Tougher Fundamentals

Pointing to the maturing and increasingly competitive environment across all of AT&T’s core segments, Niknam stated that the tougher landscape was likely to pressure the company’s performance in 2017.

“In Wireless, we expect headwinds from elevated competition, market maturation and a looming iPhone 8 refresh to outweigh benefits from AT&T’s 2G network shutdown and continued shift to “no-subsidy” plans,” the analyst noted.

For the Entertainment segment, the analyst expressed a positive stance while lowering the linear video and segment margin estimates to reflect the increasing competition and growth investments.

“As such, we think 4Q results and 2017 targets may re-focus the spotlight on a tougher operating environment AT&T faces in its core segments,” Niknam pointed out.

The analyst believes that a large part of the post-election appreciation in the stock was driven by non-fundamental catalysts, including higher expectations of corporate tax reform and a more moderate regulatory environment.

Image: Mike Mozart, Flickr