AT&T (NYSE:T) Stock Up After Barclays Upgrade

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AT&T Inc (NYSE:T) stock rose 2.15% (As on Dec 21, 11:57:14 AM UTC-4, Source: Google Finance) after Barclays upgraded the stock to overweight from equal weight, with an unchanged price target of $30. Analyst Kannan Venkateshwar told investors they have been talking up AT&T’s attractiveness as an investment for some time but refrained from upgrading the stock due to concerns about the expected “drag from the Warner Media deal technicals and uncertainty regarding the competitive environment.” Venkateshwar noted that Discovery’s and AT&T’s core valuations adjusted for the Warner deal are at historical lows. And Venkateshwar believes AT&T could be closer to a floor than Discovery. Going forward, AT&T will likely have more fundamental visibility and benefit from deal structure catalysts

Venkateshwar also cited the improved positioning of telecom companies in 2022 because wireless trends have “relatively more visibility” compared to cable. He also mentioned Infrastructure Act tailwinds and potential gains from new revenue sources.

On the other hand, the company had posted stronger-than-expected second-quarter earnings Thursday, thanks in part to impressive subscriber gains for its HBO streaming service, as it continues its transition from media assets to a ‘pure play’ telecom. AT&T’s adjusted earnings for the three months ending in September were pegged at 87cents per share, up 14.4% from the same period last year and 9 cents ahead of the Street consensus forecast. Group revenues, the company said, fell 5.8% to $39.9 billion, a figure that came in just ahead of analysts’ estimates of a $39.377 billion tally. AT&T had added 12.5 million global subscribers to its HBO and HBO Max streaming services, an expects its global base to rise to between 70 million and 73 million by the end of the year, as it continues to challenge its larger rival Netflix. The group had also added 928,000 post-paid wireless subscribers and 289,000 new broadband customers.

Looking into the final months of the year, AT&T sees adjusted earnings to be at the “high end” of a “low-to-mid-single digit” growth range, adding its on track to meet its free cash flow target of $26 billion.

Meanwhile, the company had closed the DIRECTV transaction and continues to expect the WarnerMedia deal to close by midyear 2022. With these and other dispositions, the company had monetized or announced plans to monetize more than $55 billion of assets over the past year.

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