Equities

AT&T Eyes 21% Growth, Analysts Optimistic Despite Leak

Analysts bullish on AT&T's growth potential, projecting over 21% upside despite recent challenges.

By Bill Bullington

5/16, 07:15 EDT
AT&T Inc.
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Key Takeaway

  • JPMorgan and Wells Fargo analysts predict AT&T's growth, with price targets suggesting up to 21% upside from its current $17.33.
  • Despite a data leak, AT&T exceeded Q1 earnings expectations and reaffirmed its yearly forecast, showing resilience.
  • With the lowest postpaid customer churn ever in Q1 and a projected 3% wireless revenue growth in 2024, AT&T shows strong potential for long-term gains.

Analysts See Upside for AT&T

Despite lagging behind the overall market in 2024, AT&T has garnered positive attention from analysts at JPMorgan and Wells Fargo, who believe the company is poised for long-term growth. JPMorgan analyst Sebastiano Petti highlighted AT&T's attractive valuation, citing the company's growth profile, cost-cutting efforts, stable wireless trends, and expanding consumer fiber business as key factors. With a history dating back to 1876, AT&T stands today as the fourth-largest telecommunications company globally. Both JPMorgan and Wells Fargo anticipate growth in AT&T's wireless business, driven by a steady influx of new customers. Petti's price target of $21 per share suggests a potential upside of over 21% from the closing price of $17.33 on Wednesday. Despite a modest increase of less than 3% in 2024, AT&T's dividend yield remains substantial at 6.41%.

Resilience Amid Challenges

AT&T's performance in 2024 has been partly overshadowed by a data leak that exposed millions of customers' information on the dark web. However, this incident did not alter the company's financial outlook. In April, AT&T exceeded Wall Street's first-quarter earnings expectations but fell slightly short on revenue forecasts, as reported by FactSet. The company has reaffirmed its full-year forecast, projecting adjusted earnings of between $2.15 and $2.25 per share. Wells Fargo analyst Eric Luebchow emphasized the strength of AT&T's wireless and consumer wireline businesses, which have compensated for the impacts of the recent network outage and cyberattack, as well as challenges in the business wireline segment. Luebchow maintains an overweight rating on the stock, with a $20 price target, indicating a 15% upside potential.

Financial Outlook and Performance

AT&T has projected a 3% increase in wireless service revenue growth for the year, with free cash flow expected to be between $17 billion and $18 billion in 2024. The company reported the lowest level of postpaid customer churn for the first quarter ever, signaling strong customer retention. Analyst consensus data shows a mix of strong buy, buy, and hold ratings for AT&T stock, with an average price target of $19.58, suggesting a nearly 13% upside. The highest price target stands at $29.00, while the lowest is at $11.00.

Street Views

  • Sebastiano Petti, JPMorgan (Bullish on AT&T):

    "[W]e see AT&T’s current valuation as attractive given the company’s growth profile, cost cutting efforts, stable (and profitable) wireless trends, and ramping consumer fiber business... AT&T is through its elevated capital investment spend for 5G and we expect steady [free cash flow] generation to support dividend payments and reduce debt."

  • Eric Luebchow, Wells Fargo (Bullish on AT&T):

    "T’s wireless and consumer wireline businesses continue to be bright spots, more than offsetting the recent network outage/cyberattack noise and business wireline headwinds... We view risk/reward as very favorable with guidance reiterated."