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Brand Face-Off: AT&T Inc. vs. Verizon Communications Inc.

Evaluating T and VZ from technical and sentiment viewpoints

by 2/3/2014 12:48:18 PM
Stocks quoted in this article:

Telecommunications specialists AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) have both struggled to make headway over the past 12 months, with the former churning mostly between $32 and $39, and the latter stuck between $46 and $51. More recently, the stocks have been moving toward annual-low levels. In fact, Verizon is currently situated just 5.8% above its Feb. 4, 2013 low of $44.01, after shedding about 5% year-to-date to trade at $46.74. Meanwhile, AT&T dropped to a 12-month low of $32.01 last Wednesday, after offering cautious earnings guidance, and is now looking at a year-to-date loss of 8.3% at $32.24.

Daily Chart of T since January 2013

Daily Chart of VZ since January 2013

Nevertheless, the equities' weak technical showings haven't shaken the optimism from their options traders. Right now, AT&T sports a Schaeffer's put/call open interest ratio (SOIR) of 0.74, with calls outnumbering puts by a margin of roughly 4-to-3 among options expiring within the next three months. This reading is just 6 percentage points from a 12-month low, proving short-term speculators have rarely been more call-heavy toward the stock during the past year.

Likewise, Verizon's SOIR of 0.68 ranks lower than 79% of comparable readings from the past 12 months, showing its short-term traders have also been more call-focused than usual lately. Should the stocks continue to disappoint on the charts, these bullish bettors may hit the exits, which could create additional headwinds for the shares.

Meanwhile, on Wall Street, brokerage firms maintain opposing outlooks on the underperforming equities. To be specific, AT&T sports 19 "hold" or worse ratings and just nine "strong buy" recommendations, plus a consensus 12-month price target of $36.08, which denotes a slim premium to the stock's current perch.

On the other hand, however, Verizon boasts 19 "buy" or better endorsements, nine "holds," and not a single "sell" or worse suggestion, along with an average 12-month price target of $53.84, representing expected upside of 15.2%. As such, the door is propped wide open for potential downgrades and/or price-target cuts in the near term, which may negatively impact the shares.

With that being said, AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) may both be poised to extend their downward trajectories, with the latter more likely to see greater losses, from a contrarian point of view.

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