Verizon Upgraded, Telecom Rally Continues On Tax Reform, AT&T Rises

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Telecoms AT&T ( T ) and Verizon Communications ( VZ ) continued their tax reform fueled rally on Tuesday as one analyst upgraded Verizon to buy on views that earnings growth will rebound.

[ibd-display-video id=3019249 width=50 float=left autostart=true] Verizon rose 2.6% to close at 53.19 on the stock market today . Verizon has rallied more than 20% since Nov. 15. AT&T jumped 3.3% to close at 38.10. AT&T has climbed 17% since hitting a trough Nov. 6 even though the Department of Justice has sued to block its purchase of Time Warner ( TWX ).

Instinet-Nomura analyst Jeffrey Kvaal set a price target of 61 on Verizon, up from 47.

"After three years of stable to declining (earnings) - Verizon's self-described "plateau" - we think the company is finally poised to resume (earnings) growth," Kvaal said in a note to clients. "Accordingly, we are upgrading Verizon on better visibility into subscriber growth, improved service revenue trajectory and cost savings which should drive further margin expansion over the next several year. Tax reform could add another 20% to (earnings) upside."

Verizon has formed the Oath-branded digital media company after acquiring Yahoo and AOL aiming to boost digital advertising revenue.

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Republicans are aiming to pass tax reform legislation before year end.

The Senate's version would cut the U.S. corporate rate from 35% to 20% and allow companies to immediately expense capital spending over the next five years.

"The broad outlines of winners and losers from proposed tax reform should be reasonably clear," Craig Moffett, analyst at MoffettNathanson, said in a report.

Moffett went on to say: "Companies that pay high cash taxes - Comcast ( CMCSA ), for example, but also Verizon and AT&T - will benefit. Companies that don't pay much in taxes - Sprint ( S ), for example - won't, or at least won't as much. Due to limitations on interest deductibility, companies that are heavily levered - say, or Altice USA (ATUS), or Dish Network (DISH) - will get less benefit than companies that aren't."


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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