MW Are AT&T and Verizon good stocks for a recession? This analyst makes the case.

By Emily Bary

Mobile phones are 'addictive' - and the companies that sell wireless service are running simpler businesses than they did during the last 'economic scare'

Telecommunications stocks are often thought to be relatively safe places to ride out downturns - and that could be the case even more so nowadays.

Verizon Communications Inc. $(VZ)$ and AT&T Inc. $(T)$ pay juicy dividends that can hold appeal in more defensive markets. Verizon's yield is more than four times that of the S&P 500 SPX, while AT&T's is nearly three times.

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But there are also narrative reasons to consider the stocks this time around. A Raymond James analyst noted that telecom companies such as AT&T and Verizon are simpler businesses than in the past. Both have offloaded media units in recent years, and along with T-Mobile US Inc. $(TMUS)$, they've deepened their presence in internet services.

"This is the first economic scare when AT&T and Verizon are both operating as similar fiber AND wireless businesses, without all the noise AT&T had in the past, while T-Mobile is still predominantly wireless but increasing its fiber presence primarily via M&A," Raymond James' Frank Louthan IV wrote in a note to clients on Monday.

That trend "argues for stability" in the telecom stocks, he continued.

He noted that telecommunications companies don't have much direct exposure to tariffs, and they sell services viewed by many customers to be essential. "Mobile phones are probably the most addictive consumer product, and even if hit with higher prices from tariffs in the near term, we highly doubt this will negatively impact the demand for wireless services," Louthan wrote.

While it's true that consumers might get stingier about upgrading their phones to new models in a tough economic climate, that's probably not a bad thing for AT&T, T-Mobile or Verizon. "Carriers generally lose money on selling equipment, so if customers choose to keep their phones longer, buy less expansive handsets, etc., that is actually a net positive," he wrote.

By his math, tariffs could add $8 or $9 a month to the cost of a $1,000 new phone through a plan. "Push comes to shove, we believe the American consumer will skip a fancy coffee or two a month to make that happen if they want/need a new handset," he wrote as he inched his price target on AT&T's stock up a buck to $30 and raised his Verizon price target to $47 from $45.

Those stocks, along with T-Mobile's "are often bought en masse when investors feel they have to, not because they want to, own them, and they look for the first excuse to rotate out," Louthan said in his report. But this time around, as "decades of U.S. foreign trade relations have been upended violently with an unknown outcome," the wireless stocks could be worth holding for a longer duration as Wall Street tries to make sense of the new reality.

Citi Research analyst Michael Rollins weighed in on the sector as well, noting that AT&T's stock is still his top pick, though admittedly one not without risks in the event of a recession.

"We continue to like the multi-year prospects for AT&T to use core strategic volumes and price...actions to deliver annual financial growth, while we recognize that a recession scenario could weigh on its financial performance, especially in the legacy portion of its business segment," he wrote.

-Emily Bary

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April 07, 2025 12:36 ET (16:36 GMT)

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