T-Mobile Stock Drops After Downgrade. Why It Could Keep Lagging Rival AT&T.

T-Mobile US shares were falling on Wednesday, having been downgraded to underperform by KeyBanc analyst Brandon Nispel. (Chip Somodevilla/Getty Images)

T-Mobile US stock was falling Wednesday after being downgraded by KeyBanc, which warned that fiber weakness and a tough macro environment could mean the wireless network operator keeps on underperforming.

Shares slid 1.8% to $231.78 in early trading. The S&P 500 was up 0.6%.

The move came after analyst Brandon Nispel cut his rating on T-Mobile to Underweight from Sector Weight in a research note published late Tuesday. He also issued a $200 price target, implying that the stock will fall about 15% from its level as of Tuesday’s close.

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T-Mobile shares were up 6.9% this year heading into Wednesday’s trading. That’s roughly in line with Verizon Communications stock’s 7.7% gain, but well below AT&T ‘s 24% jump.

Nispel expects the stock to carry on underperforming as wireless network operators shift to a bundled model, where they offer core services like broadband, pay TV, phone lines, and mobile data under one contract.

Right now, T-Mobile just doesn’t have enough of a presence in fiber internet to compete, the analyst said, particularly given that its peers have sought to strengthen their hands in that area. AT&T agreed to buy Lumen’s fiber business for $5.75 billion in May, and Verizon reached a $20 billion deal for fiber internet provider Frontier Communications in September 2024.

Nispel also warned that a tough macroeconomic environment could drag down T-Mobile shares. Telecom providers have reported a steady uptick in churn rates this year, suggesting that customers are shopping around for cheaper deals amid worries that consumer spending could soon slow down.

Slowing immigration and heightened competition from cable operators like Comcast and Charter Communications are among the other headwinds facing the sector, the analyst warned.

Write to George Glover at george.glover@dowjones.com