Verizon shares down after Citi downgrades, forecasting lower wireless prices

Verizon shares fell on Monday following a Citi demotion, citing a possible decline in wireless prices in the future.

Citi demoted the stock to its neutral buying level and maintained its price target of $ 62. Verizon shares fell more than 1% in pre-market trading on Monday.

"Verizon's continued operational performance in the wireless category may not be enough to spur further multi-expansion at a time when investors are more likely to question the competitive environment and the long-term risks to the future. pricing and margins, "wrote Citi's Michael Rollins in a note to customers.

The space of the wireless operators shrinks with a possible merger between T-Mobile and Sprint on the horizon. As new competitors enter the space with no traditional pricing and different margin targets, Verizon's possibilities for increasing margins are narrowing, Rollins said.

A merger between T-Mobile and Sprint "creates a fourth potentially disruptive competitor [that] could have a dilutive effect on prices and long-term margins for the wireless industry, "said Rollins.

Rollins said that Verizon, the second largest US mobile phone operator, should consider and is well positioned to buy DISH, which "contains a quantity of disturbing spectrum that can be used to build a large-scale network."

In addition, Verizon is at risk because the evolution of technology in the wireless operator sector is reducing costs, which lowers the barrier to fall into the category, said Rollins.

Despite the deterioration, Citi said it was not concerned about Verizon's upcoming quarterly results.

Verizon shares have only risen 3% since the beginning of the year, while T-Mobile, Sprint and AT & T have all grown about 20% so far.

– With reports from Michael Bloom of CNBC