Verizon Downgraded On Inflation Woes, But Price Target Raised

Verizon Downgraded On Inflation Woes, But Price Target Raised

High-dividend paying Verizon Communications ( VZ ) was downgraded to neutral Tuesday on views that worries over an uptick in inflation will pressure the stock in early 2018.

[ibd-display-video id=3085698 width=50 float=left autostart=true] MoffettNathanson downgraded Verizon to neutral but raised its price target to 56 from 51.

Verizon will get a boost from lower corporate taxes in the U.S., enabling the telecom to reduce debt on its balance sheet, says MoffettNathanson. However, equity income investors will likely rotate out of the stock over worries that inflation will increase in 2018.

“With lower tax rates (and with tight labor markets and globally synchronized growth) comes a materially greater risk of inflation,” Craig Moffett, analyst at MoffettNathanson said in a note to clients. “The narrative of yield rotation has already begun; the playbook for the time being will be a relatively simple one: sell yield.”

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Verizon dipped 0.4% to 51.68 on the stock market today .

After rising in the December quarter, shares in Verizon and rival AT&T have slipped in early 2018. AT&T is down nearly 5% while Verizon has shed 2.5%.

AT&T is in a court fight with the Department of Justice, which aims to block its acquisition of Time Warner ( TWX ). AT&T was down a fraction to 36.88 in early trading on Tuesday.

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