Long-distance giants hope to hold market gains
While among the top gainers in Wednesday's rally after the Federal Reserve announced an interest-rate cut, analysts say AT&T, WorldCom and Sprint could see their stock woes continue.
By 1 p.m. PST, the close of regular trading Thursday, AT&T was up 88 cents, or more than 4 percent, to $21; WorldCom was down 44 cents, or 2 percent, to $19.44; and Sprint was up $1.56, or more than 6 percent, to $26.13. In Wednesday's run-up, WorldCom rose 26 percent to $20, followed by Sprint, up 12 percent to $24.56, and AT&T, up 10 percent to $20.13.
Last year these three companies lost two-thirds of their market value, leading all three to launch dramatic restructurings. But those announcements didn't boost any of their stocks, so analysts attributed Wednesday's rally to the Federal Reserve's announcement that it cut the short-term interest rate by a half-percentage point.
"These are large, well-capitalized firms," said Jupiter Research analyst Joe Laszlo, "and are considered among the safest in the technology sector," which explains why they outpaced rivals such as Verizon Communications and SBC Communications in their gains Wednesday. But the long-distance companies' gains, he said, were "probably just part of the larger rally."
Laszlo added that "their gains looked all the better" compared to other telecom rivals because they had dropped so precipitously in 2000.
Analysts seemed more bullish on the chances of WorldCom and Sprint to maintain their gains than AT&T. J.P. Morgan Chase analyst Thomas Lee on Wednesday raised Sprint's wireless unit, Sprint PCS, to "strong buy" from "buy," while Salomon Smith Barney analyst Jack Grubman reiterated WorldCom at "buy" with a target price of $45. AT&T, meanwhile, was held at "neutral" by Morgan Stanley Dean Witter analyst Simon Flannery.