Citi updated its outlook on AT&T (NYSE: T), increasing the stock's price target from $20.00 to $21.00 while reiterating a Buy rating. This adjustment follows AT&T's second-quarter earnings, which outlined the company's plans to advance its combined fiber and mobile approach.
The telecommunications giant intends to extend fiber access and enhance investments in 5G mobility, a Citi analyst said on Thursday.
AT&T's strategy aims to leverage the stabilizing wireless market to foster annual service revenue growth and improve annual EBITDA, benefiting from the high-margin broadband services and ongoing efficiency initiatives.
Despite a forward valuation of 5.7 times the firm's 2025 EBITDA projections and a dividend yield of 5.8%, the market appears to retain some skepticism regarding AT&T's financial growth potential.
Citi's analyst suggests that AT&T has multiple avenues to bolster its financial performance across various business segments, and therefore is positioned as Citi's preferred stock within the sector.
The earnings, however, acknowledged potential challenges that AT&T may face. including the possibility of intensified wireless competition which could drive up costs, the time and significant capital required to expand fiber access, and the continuing challenges in the business wireline sector.
Meanwhile, Oppenheimer has increased its price target on AT&T shares to $23.00, maintaining an Outperform rating. The firm's decision comes after AT&T reported a strong quarter, surpassing low expectations with significant growth in wireless postpaid subscribers, average revenue per user (ARPU), and a stable churn rate.
Scotiabank maintained a positive outlook on AT&T, raising the company's price target to $24 and maintaining a Sector Outperform rating. The firm highlighted AT&T's strategic focus on balancing growth with profitability and commended its performance in the wireless segment. RBC Capital, JPMorgan, TD Cowen, and Evercore ISI also increased their price targets for AT&T. The telecom giant's financial results showed revenue and EBITDA aligning with market expectations, while free cash flow surpassed predictions, largely due to lower capital expenditures.
Also, JPMorgan's revised price target of $24 is based on expectations of 9.4 times the company's estimated 2025 free cash flow and 6.4 times its estimated 2025 enterprise value to EBITDA. Evercore ISI, on the other hand, raised its price target for AT&T shares to $19.00, reflecting a positive outlook on the company's future subscriber growth.
InvestingPro Insights
As AT&T (NYSE:T) continues to execute its strategic initiatives to spur growth, real-time data from InvestingPro provides additional context to the company's financial landscape. AT&T's market capitalization stands at a robust $140.46 billion, reflecting the scale of its operations within the telecommunications industry. The company's P/E ratio, a key indicator of its valuation, is currently at 13.61, with an adjusted P/E ratio for the last twelve months as of Q2 2024 at an even more attractive 9.96. This suggests that investors might find the stock's valuation appealing, especially when considering the strong free cash flow yield implied by these figures — a point underscored by one of the InvestingPro Tips. Moreover, AT&T has demonstrated a commitment to returning value to shareholders, not only through its significant dividend yield of 5.79% but also by maintaining dividend payments for an impressive 41 consecutive years.
InvestingPro Tips also highlight that AT&T is a prominent player in the Diversified Telecommunication Services industry and has experienced a strong return over the last three months, with a 17.29% price total return. This momentum aligns with Citi's positive outlook and the recent upgrade in the stock's price target. For investors seeking further insights and tips, InvestingPro offers additional guidance on AT&T, which can be accessed with a special offer: use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 6 more InvestingPro Tips available that could provide deeper analysis and investment considerations for AT&T.
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