Frontier's Premium Valuation Vs AT&T, Verizon And Fiber Growth Target Risks Trigger Downgrade By This Analyst

  • Morgan Stanley analyst Simon Flannery downgrades Frontier Communications Parent, Inc FYBR from Equal-Weight to Underweight, lowering the price target from $23 to $19.
  • In Simon's view, there are three main drivers of his downgrade.
  • Frontier shares trade at a premium to Telco peers after recent outperformance. Frontier trades at a significant premium to wireline peers versus AT&T Inc T and Verizon Communications Inc VZ, which both offer 6%+ dividend yields.
  • Also Read: Frontier Communications Adds 381K New Fiber Builds Locations In Q4, Targets 1.3M New Locations In FY23
  • Flannery sees rising risks to Fiber growth targets due to increasing competition from FWA and Cable providers.
  • Frontier's plans for a slower expansion of Fiber construction could push out positive free cash flow generation until 2027 or beyond as leverage continues to ramp. 
  • The main catalysts he focuses on include Fiber adds and ARPUs, and ongoing funding actions. 
  • Simon notes that stronger Fiber adds and improved ARPU trends could help the company drive better-than-expected financial results. 
  • He also points out that strategic alternatives could be another way to create shareholder value.
  • Price Action: FYBR shares traded lower by 9.63% at $21.35 on the last check Monday.
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