Guggenheim Adjusts Wireless Carrier Estimates As Holiday Promotions Emerge

AT&T Inc. (NYSE: T), Sprint Corp (NYSE: S), T-Mobile US Inc (NASDAQ: TMUS) and Verizon Communications Inc. (NYSE: VZ) have indicated positive momentum in the fourth quarter despite lower promotional activity.

Competition could intensify over the next two weeks, with handset makers offering buy one, get one — BOGO — deals, according to Guggenheim Securities.

The Analyst

Guggenheim's Mike McCormack maintained the following ratings and price targets:

• AT&T: Buy, $38 price target;
• T-Mobile: Buy, $85;
• Verizon: Buy, $61;
• Sprint: Neutral, $6.

The Thesis

Aggressive deals are already being offered in the prepaid segment, while handset wars are being fought with BOGOs, McCormack said in a note this week.

Linear TV could remain under pressure, although customer losses may be lower than was previously anticipated, the analyst said.

For AT&T, Guggenheim lowered its Q4 satellite net loss estimate from 374,000 to 345,000. In light of price increases, the firm raised its linear video ARPU estimate to $124.12.

On the wireless side, Guggenheim reduced its Q4 postpaid handset net and gross adds estimates by 48.8 percent and 7.3 percent, respectively. For 2019, the EPS estimate was upped by 0.9 percent to $3.78.

Sprint may witness some headwinds and churn could increase, with seasonality and the end-of-year promotions, McCormack said.

Guggenheim reduced its forecast for wireless service revenue and cash EBITDA by 0.6 and 3 percent, respectively, on estimates of lower postpaid handset net losses and lower prepaid net adds.

Guggenheim reduced its prepaid net adds estimate for T-Mobile from 20,000 to 5,000, and its Q4 total revenue and EBITDA estimates from the carrier were lowered by 0.4 and 0.5 percent, respectively.

The sell-side firm raised its Q4 postpaid churn estimate for Verizon from 1.04 to 1.07 percent and lifted the handset net adds estimate from 295,000 to 374,000.

Given the increased focus on wearables, Guggenheim's total postpaid net adds estimate was raised from 515,000 to 791,000.

Related Links:

With Valuation Priced In, Morgan Stanley Downgrades Verizon

Citi: Buy The Dip In AT&T

Photo by Chris Potter/Wikimedia.