Telecom stocks, including Verizon Communications, AT&T, and T-Mobile, experienced price-target cuts on Monday, driven by investor apprehension surrounding the potential entry of Amazon.com into the wireless phone plan market.
Analyst Adam Fox-Rumley from HSBC Global Research lowered his price target for AT&T to $19 from $21, T-Mobile to $165 from $185, and Verizon to $39 from $42.50.
Year to date, AT&T shares have declined by 17% to $15.34, T-Mobile shares are down 5.4% to $132.40, and Verizon stock has dropped 11% to $35.01.
The downward trajectory for these stocks accelerated on Friday following a report by Bloomberg suggesting that Amazon was in discussions with the telecom companies to potentially offer low-cost or even free nationwide mobile plans exclusively for Prime subscribers.
Despite the denials from the companies involved, Fox-Rumley adjusted his price targets to account for the added risk, acknowledging the prevailing nervous sentiment. In a research note, he expressed concerns that Amazon’s potential entry into the U.S. mobile market could threaten pricing and customer growth in the telecom sector.
While Amazon has not confirmed the plan, Fox-Rumley believes that the possibility of mobile services being included in the Prime bundle cannot be completely ruled out, leading to sustained apprehension.
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However, Fox-Rumley believes that the market reaction following the report was excessive, suggesting that the sell-off of telecom stocks was unwarranted. He maintained Buy ratings for AT&T and T-Mobile, and a Hold rating for Verizon.
However, not all analysts remain convinced that Amazon actively pursues a wireless plan for Prime subscribers. Justin Post, an analyst from BofA Securities, stated that Amazon’s exploration of various opportunities to attract Prime members is not surprising. However, he deems it unlikely for Amazon to offer subsidized wireless services at a loss, considering its focus on improving retail margins and its already high penetration of Prime households in the U.S.
Post maintains a Buy rating for Amazon, with a price target of $139. On Monday morning, the value of Amazon shares stood at $125.46.