On Tuesday, AT&T (NYSE:T) shares received an upgrade from Neutral to Buy by New Street Research, signaling a positive outlook for the telecommunications giant. The firm's decision was influenced by AT&T's guidance and share repurchases, which are viewed as more favorable than the sell-side consensus.
According to the analyst from New Street Research, the current guidance and repurchase plans exceed what sell-side analysts had anticipated. Despite this, there is an acknowledgment that buy-side expectations might be even higher, leading to some uncertainty about the stock's immediate performance. The analyst noted that if the market were to react solely based on sell-side expectations, AT&T's stock would likely see a rise.
New Street Research forecasts that AT&T will achieve a free cash flow (FCF) per share of $2.71 by 2027. This projection is 17% higher than the adjusted consensus estimate of $2.31, which takes into account adjustments for DirecTV (DTV).
When applying the consensus multiple of 10 times to this FCF estimate, the analysis suggests that AT&T's stock could appreciate approximately 10% per year over the next two years, with pricing based on the projected 2027 FCF at the end of 2026.
The report further elaborates on the potential total return, estimating an annual return of 15% for AT&T. This optimistic outlook reflects the firm's confidence in AT&T's financial trajectory and its ability to deliver value to shareholders over the coming years. The upgrade from New Street Research comes as a notable endorsement of AT&T's strategic direction and financial management.
In other recent news, AT&T has been making strategic moves to boost its operations and growth. The company has inked a deal with Corning (NYSE:GLW), valued at over $1 billion, to expand its fiber network. In addition, AT&T purchased spectrum assets from UScellular for $1.018 billion, a move that will benefit AT&T subscribers nationwide.
On the financial front, AT&T's third-quarter 2024 earnings report showed total revenues of $29 billion and an increase in capital expenditures to $5.3 billion. The company added 403,000 postpaid phone subscribers and experienced a 6% EBITDA growth in its Mobility segment.
Analysts have responded to these developments with TD (TSX:TD) Cowen raising its price target to $26.00, maintaining a Hold rating on the stock, while Oppenheimer raised its price target to $24, maintaining an Outperform rating. Both adjustments were influenced by AT&T's strong quarterly performance and progress in reducing debt.
In a survey conducted by RBC (TSX:RY), AT&T's mobility customers placed the highest value on network quality and were the most inclined to bundle their services with broadband options. This preference aligns with the company's focus on providing a high-quality network experience.
These are recent developments that reflect the ongoing activities and strategies of AT&T.
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