Zhitong Finance and Economics learned that according to Citigroup's U.S. stock strategy report, the bank downgraded the overall communication services industry from "overweight" to "holding".
Analysts said that within the sector, the bank downgraded ** and entertainment stocks from "overweight" to "wait-and-see" because its outperformance will stagnate. "The expected growth drivers are likely to be met with broader economic pressures, as well as negative valuations".
On a 10-year basis, valuations for ** and entertainment stocks remain between the 70th and 80th percentiles. In addition, margins are at their lowest level in five years, but trends in margins, sales and cash flow are encouraging.
On the other hand, telecom services stocks were upgraded to "hold" from "**" as fundamentals became more positive during the quarter, valuations are now more attractive, and the prospect of lower interest rates is helping to ease debt concerns, the report said.
On a 10-year basis, valuations for telecom services stocks are now "looking quite attractive" as EBIT improves.
**For the other hand, here's what Citi has rated in the S&P 1500 index, ranked by ETR (Expected Total Return):
Omnicom Group (OMC.)us)-etr 32%
Warner Bros. Discovery (WBD.)us)-etr 29%
live nation entertainment(lyv.us)-etr 26%
Eppiz, IPGus)-etr 25%
Paramount Universal (paraus)-etr 21%
meta(meta.us)-etr 21%
at&t(t.us)-etr 21%
verizon(vz.us)-etr 19%
Disney (dis.)us)-etr 18%
Citi has a "Sell" rating** including:
lumen technologies(lumn.us)-etr -29%