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U.S. Cellular
stock was surging Tuesday after an analyst at J.P. Morgan analyst upgraded shares of the telecommunication company, along with its parent
Telephone & Data Systems.
The upgrade from analyst Philip Cusick follows an announcement Friday from
U.S. Cellular
(ticker: USM) and
Telephone & Data Systems
(TDS) that their boards were exploring strategic alternatives for U.S. Cellular. Telephone & Data Systems owns about 82% of U.S. Cellular.
This announcement came the same day that U.S. Cellular reported a 6.8% second-quarter sales drop and cut its full-year services revenue outlook.
Since the announcement, shares of U.S. Cellular have surged 103%. The stock has now gained 70% in 2023, while Telephone & Data Systems has risen 45% this year.
Cusick upgraded shares of both companies to Overweight from Neutral and increased his price target on U.S. Cellular to $52 from $24, and Telephone & Data Systems to $38 from $14.
“We have advocated for more than a decade that this company is too small to compete with
T
/
VZ
/
TMUS,
and it looks like with this announcement, and guidance reduction, that the Carlson family may finally agree,” Cusick said in a research report. Leroy Carlson is the CEO of Telephone & Data Systems.
“While churn is doing well, clearly the costs to drive gross adds to USM and retain customers are uneconomic, so selling the company seems like the right move,” Cusick added. “The exploration of strategic alternatives is likely to unlock substantial value.”
Shares of U.S. Cellular were rising 14% Tuesday to $35.51, and were on pace for their highest close since July 2021, according to Dow Jones Market Data. Shares of Telephone & Data Systems were climbing 15% to $15.22, and were on pace for their highest close since November 2022.
Write to Angela Palumbo at [email protected]
Read the full article here
