AT&T Raised to Buy at Truist on Increased Visibility

By Senad Karaahmetovic

Truist analysts upgraded shares of AT&T (NYSE:) to Buy from Hold with an unchanged price target of $21 per share.

AT&T shares are down just over 10% YTD, marking a much better YTD performance relative to a 23% drop in the . Still, analysts remind clients that T shares underperformed for 15 years – down 46.6% compared to the S&P 500 up 144.6%.

The upgrade call comes after the company “demonstrated an ability to focus on core business as opposed to acquisitions of loosely related companies at market high valuations,” analysts wrote in a client note.

As a result, the analysts believe that “trends of the past few quarters are increasingly likely to continue to the point where the company is capable of generating $17.8bn+ of FCF in 2023 and $19.6bn+ of FCF in 2024 that result in a 14.0% and 15.4% FCF yield for 2023 and 2024 respectively.”

In particular, they argue that DSL (digital subscriber line) losses will represent less of a headwind moving forward. Another key reason behind the upgrade call is AT&T’s ability to generate strong FCF.

“Now that it is increasingly clear that we are in fact on a trajectory to a $17.0+ billion 2023 FCF and beyond, we believe the company should be in an increasingly strong position to either return capital to shareholders or reinvest in the core business it is demonstrating success with,” the analysts concluded.

Source link