On Monday, BofA Securities updated their outlook on AT&T (NYSE:T), raising the price target to $24 from the previous $20, while maintaining a Buy rating on the company's shares. The revised price objective reflects a valuation of approximately 10.2 times the estimated earnings per share (EPS) for the year 2025, an increase from the prior multiple of 9.0 times the 2024 estimated EPS.
The adjustment in the price target is attributed to AT&T's consistent performance and a more streamlined corporate structure. According to BofA Securities, these factors warrant a slight premium over the company's historical average valuation metrics. The analyst's comments highlighted AT&T's progress in executing its initial plan for fiber optic infrastructure expansion, which is nearing completion.
AT&T's strategy involves leveraging its existing network footprint to extend fiber optic service availability and increase market penetration while managing capital expenditures. The company aims to achieve growth without significantly raising investment levels, which is expected to reduce the necessity for mergers and acquisitions and thereby limit associated risks.
The analyst from BofA Securities expressed confidence in AT&T's potential to continue its growth trajectory, supported by its infrastructure investments and operational focus. This positive outlook is encapsulated in the maintained Buy rating and the increased price target, signaling an optimistic view of the company's financial prospects in the coming years.
In other recent news, AT&T's third-quarter 2024 earnings forecasts have been adjusted by RBC Capital, leading to an increased share price target of $22. The changes reflect decreased equipment revenue and timing adjustments in Free Cash Flow. Furthermore, AT&T has declared dividends for its common and preferred shares, with payments scheduled for November 1, 2024.
In a potentially industry-altering move, AT&T and TPG Inc are in discussions to merge their DirecTV satellite service with Dish. However, no official details or timelines have been released.
On the analyst front, Citi has upgraded its price target for AT&T from $21 to $24, maintaining a Buy rating and highlighting the company's solid financial growth prospects. However, AT&T is in the midst of a labor dispute with the Communications Workers of America, leading to an ongoing strike involving over 17,000 employees.
InvestingPro Insights
AT&T's recent performance and future prospects align well with several key metrics and insights from InvestingPro. The company's P/E ratio of 14.54, which drops to 10.89 when adjusted for the last twelve months, suggests that AT&T's stock may be undervalued relative to its earnings potential. This valuation perspective supports BofA Securities' decision to raise the price target.
InvestingPro Tips highlight AT&T's strengths in the current market. The company is noted for its high shareholder yield and has maintained dividend payments for an impressive 41 consecutive years. This consistency in returning value to shareholders aligns with the analyst's positive outlook on AT&T's streamlined corporate structure and growth potential.
The company's recent market performance is also noteworthy, with InvestingPro data showing a strong 55.77% price total return over the past year and a 28.36% return over the last six months. These figures corroborate the analyst's confidence in AT&T's execution of its fiber optic expansion plan and overall growth strategy.
For investors seeking a deeper understanding of AT&T's financial health and market position, InvestingPro offers 11 additional tips, providing a comprehensive analysis to inform investment decisions.
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