On Friday, a Deutsche Bank analyst updated the financial model for AT&T (NYSE:T), leading to an increased price target for its shares. The new target is set at $26.00, up from the previous $24.00, while the firm continues to recommend a Buy rating for the stock.
The revision reflects minor adjustments to second-quarter and second-half 2024 forecasts, with an expectation of higher customer upgrade rates and industry switching activity. This anticipated change is attributed to the integration of generative AI into Apple (NASDAQ:AAPL)'s iOS18, slated for release in the fall of 2024. Additionally, the analyst has revised Free Cash Flow (FCF) estimates upwards after a more detailed analysis.
AT&T is regarded by Deutsche Bank as a leading choice within the Cable and Telecom sector due to its strategic position for fixed-mobile convergence. The company is also recognized for its robust wireless and home broadband industry dynamics, a positive growth outlook for its fiber broadband business, and the potential for further margin improvement as it decommissions copper networks.
Consistent operational execution and the possibility of increased wireless market share contribute to the favorable view. Furthermore, the analyst anticipates AT&T to resume share repurchases in the second half of 2025 following a period focused on debt reduction.
The report also suggests that the consensus FCF estimates for the years beyond 2025 might be undervaluing the company's potential. The valuation of AT&T is deemed very attractive, with an estimated 8.5% unlevered free cash flow yield for 2024 and a multiple of 6.1 times the projected 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA).
In other recent news, AT&T Inc. has declared quarterly dividends for both its common shares and two series of preferred stock. The declared dividend for the common shares is $0.27 per share, with shareholders of Series A and C preferred stocks set to receive $0.3125 and $0.296875 per depositary share, respectively.
The company's CEO, John Stankey, has proposed that Big Tech companies contribute to the Universal Service Fund, a government initiative subsidizing telecom and broadband services. This proposal could lead to a new funding model for the program. In a separate development, AT&T is involved in a legal challenge against the reinstatement of net neutrality rules by the Biden administration.
Lastly, significant stock trading activity has been noted by Congressman Mike Kelly and Congress member Carol Devine Miller, who both recently sold their shares in AT&T.
InvestingPro Insights
As AT&T (NYSE:T) garners attention with an updated price target from Deutsche Bank, insights from InvestingPro further illuminate the company's financial health and market position. With a market cap of $136.38 billion and a dividend yield of 5.92% as of mid-2024, AT&T stands out as a significant player offering substantial returns to shareholders. This aligns with the Deutsche Bank's perspective on the company's attractive valuation and robust industry dynamics.
An InvestingPro Tip indicates that AT&T has a perfect Piotroski Score of 9, suggesting strong financial health and operational efficiency. This is particularly relevant considering the company's strategic initiatives and potential market share increase mentioned by Deutsche Bank analysts. Additionally, the company's price to earnings (P/E) ratio stands at 12.87, reflecting a market sentiment that may factor in the anticipated growth and integration of generative AI into products affecting telecoms.
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