Story updated at 10 a.m. to reflect market activity.
CenturyLink fell 0.2% to $34.67 in morning trading.
The firm set a price target of $33 for the telecom company, saying the downgrade is a valuation call.
"We see potential risks in several parts of the business and believe other stocks we cover offer better risk/reward tradeoffs," analyst Kevin Manning wrote. "Despite solid 4Q13 results, we continue to have concerns about the CLTS (CenturyLink Technology Solutions, formerly Saavis) data hosting business as CLTS's target customer is shifting from high-touch large enterprise to more regional and SMB CTL enterprise customers. The Tier 3 acquisition is CTL's latest attempt to compete with Amazon, while its high-touch hosting platform has not been upgraded in years. Our checks indicate some top Savvis sellers have left as a result of the Savvis salesforce being integrated into the CTL Salesforce."
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Separately, TheStreet Ratings team rates CENTURYLINK INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate CENTURYLINK INC (CTL) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."