On Monday, Bernstein initiated coverage on AT&T (NYSE:T) stock with an Outperform rating, setting a price target of $28.00. The firm highlighted AT&T's return to focusing on its core competencies in rates and volume, which they excel at, after years of diversification into non-core sectors.
According to the analyst, AT&T's consistent investments in fiber optics over the past decade have positioned the company to gain broadband market share with favorable economics. These investments also enable AT&T to enhance its wireless offerings through bundled services.
The firm projects that AT&T's mobility services revenue will grow by more than 3% in the foreseeable future, in line with industry growth, propelled by a combination of pricing and line growth.
The analyst expects AT&T's EBITDA margins to increase faster than revenue growth in the medium term. This forecast is supported by the expansion of fiber penetration, which yields higher contribution margins through additional market share gains. Despite the Business Wireline segment's ongoing decline, which represents 15% of revenue and 12% of EBITDA for the year 2024, the impact on margins is lessening as this segment contracts.
AT&T is currently trading at a multiple of 6.8x its projected 2025 EBITDA. Bernstein's price target of $28 is based on a discounted cash flow (DCF) analysis and suggests a multiple of 7.2x the 2025 EBITDA. The firm believes this multiple expansion is warranted by the growth in EBITDA, which is driven by fundamental improvements in AT&T's core business.
The analyst also pointed to AT&T's approximately 5% dividend yield, which they believe has the potential for growth in the coming years through either increased dividends or stock buybacks.
In other recent news, AT&T has been the focus of several positive adjustments from financial analysts. Deutsche Bank (ETR:DBKGn) maintained a Buy rating on AT&T and increased the price target to $28, reflecting a positive view of the company's strategic plan, execution, and positioning within the telecommunications industry.
AT&T's plans to expand its Fiber-to-the-Premises footprint to over 50 million premises in the United States within the next five years was also highlighted. The company's announcement of a $20 billion share repurchase program from 2025 through 2027 signals confidence in its management and long-term strategy.
JPMorgan (NYSE:JPM) also raised their price target for AT&T shares to $28, maintaining an Overweight rating, following the company's Investor Day. The company presented an improved multiyear service revenue and EBITDA guidance, with expectations to deliver in excess of $40 billion to shareholders by 2027.
Citi upgraded AT&T's price target to $28, reiterating a Buy rating, based on the company's fiber expansion and growth strategies. New Street Research upgraded AT&T shares from Neutral to Buy, citing the company's strong guidance and share repurchases.
AT&T's recent activities include a $1 billion deal with Corning (NYSE:GLW) to expand its fiber network and a $1.018 billion purchase of spectrum assets from UScellular.
These strategic moves are expected to enhance AT&T's broadband and mobile market shares. The company's recent earnings report revealed total revenues of $29 billion and a 6% EBITDA growth in its Mobility segment.
Furthermore, a survey conducted by RBC revealed that AT&T's mobility customers place high value on network quality and are inclined to bundle their services with broadband options. These are the recent developments reflecting the ongoing activities and strategies of AT&T.
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