NEW YORK - Shares of FairPoint Communications Inc. retreated from Tuesday's highs on Wednesday, and an analyst downgraded the telecom company after the stock jumped past his target price.

Investors sent FairPoint's shares soaring on Tuesday following news that it was buying Verizon Communications Inc.'s residential telephone business in Vermont, Maine and New Hampshire for $2.72 billion.

On Tuesday, North Carolina-based FairPoint's shares gained nearly 16 percent and set a 52-week high on the New York Stock Exchange. On Wednesday, shares fell $1.21, or 5.7 percent, to $20.20 in midday trading.

Despite the downgrade, to "Neutral" from "Buy," Oppenheimer analyst Barry Sine said he still views the company as solid and well run, and called the deal "very positive."

"In our view, the key investment attraction of FRP shares is the $1.59 per share annual dividend, as we foresee little organic growth even once the Verizon deal closes," Sine wrote in a note to clients.

FairPoint had said it expects to keep the dividend unchanged when the transaction closes.

Wachovia analyst Gray Powell, who rates the company "Market Perform," also called the deal positive, as it provides more stability to the hefty dividend.

"However, we have concerns about increased business risk associated with a more urban footprint and the integration of a significantly larger asset," he wrote.
FairPoint owns local phone networks in 31 mostly rural markets in 18 states, including the three where it is buying the wireline assets.