Oppenheimer downgrades Verizon over Yahoo pursuit, other concerns

Oppenheimer & Co. reportedly downgraded shares of Verizon (NYSE: VZ) over uncertainty about a possible acquisition of Yahoo, among other factors.

Investor's Business Daily reported that while Oppenheimer remains bullish "on long-term wireless and fiber fundamentals," uncertainty over its pursuit of Yahoo's core internet assets as well expectations that it will spend billions in the FCC's incentive auction of 600 MHz spectrum are causes for concern. And the much-anticipated release of the iPhone 7 this fall could also pressure profit margins as carriers look to leverage the high-profile handset to grow their subscriber bases.

Verizon's stock has climbed 20 percent this year, and the nation's largest operator is scheduled to announce second-quarter results next week. Verizon shares were trading at $55.50 mid-day Wednesday, roughly $2 higher than Oppenheimer's target price.

Verizon reportedly bid more than $3.5 billion for Yahoo's online assets in June, but was topped by multiple bids in the range of $5 billion. The carrier is among five suitors to make offers in a latest round of bidding this week – AT&T (NYSE: T) is also said to be in the running -- and is one of three candidates favored to walk away with Yahoo.

Yahoo will reportedly request final offers from two or three bidders before deciding its fate.

The pursuit of Yahoo by the two largest American wireless carriers underscores their aggressive strategies of expanding beyond traditional mobile services into the much broader world of media. Verizon spent $4.4 billion last year to acquire AOL and its media properties and continues to build out Go90, an OTT video offering focused heavily on mobile.

Acquiring Yahoo would essentially be doubling down on its bet in digital media for Verizon, giving the carrier a massive content library and a major worldwide distribution footprint across mobile devices, PCs and other digital platforms. But carriers haven't been great at monetizing digital content since the ringtone era, and whether Verizon can build a viable digital media business is still far from clear.

For more:
- see this Investor's Business Daily report

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