Bernstein Slashes Targets On VZ, CHTR, T, CMCSA, TMUS Stocks: What’s The SpaceX Connection?

• While Starlink is not expected to materially affect telecom operators in the near term, Bernstein said it still adds another competitor to an already saturated and highly competitive market.
• The firm added that uncertainty around Starlink's long-term strategy is likely to persist, prompting it to lower price targets across the telecom sector.
• Meanwhile, reports have also suggested that SpaceX has held executive-level discussions with Charter Communications about a consumer mobile offering to leverage existing terrestrial infrastructure to accelerate its entry into the broader telecom market.

Wall Street is beginning to price in SpaceX’s telecom ambitions. Equity research firm Bernstein slashed the price targets on five major telecom operators on Monday, citing valuation risks tied to SpaceX's (SPCX) Starlink.

The company lowered price targets on Verizon Communications (VZN), Charter Communications (CHTR), AT&T (T), Comcast (CMCSA) and T-Mobile US (TMUS).

Last month, several media reports said SpaceX is planning to launch a direct-to-consumer Starlink mobile service and is considering building its own terrestrial wireless network in the U.S.

Why Bernstein Cut Telecom Price Targets

While SpaceX's Starlink is unlikely to have a substantial near-term impact for telecom companies, it "represents another competitor in an already mature and highly penetrated broadband market," Bernstein reportedly said in a note, as per TheFly. 

The analyst said the prospect of a Starlink mobile offering could intensify competition in the U.S. telecom sector, making subscriber gains increasingly dependent on taking market share from rivals. 

The firm added that uncertainty around Starlink's long-term strategy is likely to persist, prompting it to lower price targets across the telecom sector.

VZ, CHTR, T, CMCSA, TMUS Target Cuts 

Bernstein lowered the price target on Verizon to $44 from $49 and maintained a ‘Market Perform’ rating on the shares, as per TheFly. The revised target still implies an upside of about 3% from current levels. 

The firm cut Charter’s price target to $170 from $210 and kept a ‘Market Perform’ rating on the shares, implying an upside of about 29% from current levels. 

Comcast’s target was lowered to $28 from $32 at Bernstein with a ‘Market Perform’ rating, while AT&T was cut back to $25 from $30 with an ‘Outperform’ rating. 

Bernstein lowered the price target on T-Mobile to $220 from $245 and kept a ‘Market Perform’ rating on the shares.

“I don't want to own AT&T or Verizon,” Jim Cramer said on Monday on his CNBC Mad Dash segment, citing the Bernstein target cuts. 

Why Is SpaceX’s Starlink Becoming A Telecom Threat?

SpaceX already offers Starlink Mobile services through T-Mobile, providing satellite-based connectivity in areas with limited cellular coverage. 

However, company executives have signaled that the opportunity in mobile could ultimately dwarf Starlink's broadband business. "I think the numbers of users of Starlink Mobile will far exceed our Starlink broadband," SpaceX President Gwynne Shotwell said in an interview. 

With more than 12 million Starlink customers across over 160 countries, a rapidly expanding satellite network and access to wireless spectrum assets, SpaceX’s mobile ambitions can threaten the telecom industry.  

Meanwhile, reports have also suggested that SpaceX has held executive-level discussions with Charter Communications about a consumer mobile offering to leverage existing terrestrial infrastructure to accelerate its entry into the broader telecom market.

The central debate now seems to be whether SpaceX’s mobile ambitions will go beyond rural areas with limited connectivity. 

“Now the question is, can they do the suburbs? Because if it's just rural, then you wouldn't be worried," Cramer said in his segment. 

All five telecom stocks have declined in the past month. 

What’s Retail’s Stance On VZ, CHTR, T, CMCSA, TMUS Stocks?

On Stocktwits, retail sentiment across all five telecom stocks was in the ‘bearish’ territory at the time of writing. 

Retail sentiment for SPCX stock was also ‘bearish’.

One user said on AT&T, “$T yields 5.3% and is trading near a 52-week low. Market’s pricing in the SpaceX threat hard here, but the question is whether that risk really justifies this kind of discount. Quiet name, but the setup looks like a classic low-expectation value trade if the pressure stays contained.”

Another user said last week, “$VZ Friday July 24th we get earnings, subscriber numbers and most importantly the guidance.  In the end its all about the numbers, we will see who's really making money.  $SPCX is not even on par with any telecom, the price wars with $T and $TMUS  basically killed any chance for them to compete, not  even getting into the reliability issue, anyone with a brain knows the limits.”

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