AT&T gains as Wells Fargo names it 2023's top wireless pick
Joe Hendrickson/iStock Editorial via Getty Images

AT&T (NYSE:T) rose moderately Tuesday alongside an upgrade to Overweight at Wells Fargo, where they're getting defensive-minded with telecoms ahead of a "choppy" 2023.
"We view the telecom sector as a relatively defensive play going into 2023, despite some growth challenges ahead," analyst Eric Luebchow said, noting subscriber growth will remain "elevated" vs. historical levels but still slow year-over-year.
Fiber-to-the-home construction should grow more than 20% even amid hurdles in inflation and rising cost of capital, and fixed wireless will likely keep taking broadband share (though at a moderating pace), he said.
But AT&T (T) becomes the top wireless pick for the year, with upside to some lower expectations in free cash flow and earnings before interest, taxes, depreciation and amortization, he notes, along with an improving balance sheet that should "open up share repurchase optionality" of as much as $15B over the next few years.
Its valuation also looks "reasonable" particularly compared to the much more challenged Verizon (VZ), facing consumer phone declines amid rising rates.
Along with the upgrade to AT&T (T), Luebchow's top 2023 ideas for the sector include T-Mobile (NASDAQ:TMUS) and Frontier Communications (NASDAQ:FYBR), each also higher Tuesday (up by 0.5% and up 1.1% respectively).
Fiber-to-the-home's outlook seems "mostly sunny," he suggested, with the next major catalyst coming through $42.5B in federal subsidies hitting in the second half, with the best pure-play options resting in Frontier (FYBR) and Dycom (DY), itself up 2.4% Tuesday.
Meanwhile, U.S. Cellular (NYSE:USM) has dipped 2.5% as Wells Fargo downgrades it to Underweight. "We expect a combination of heavy promotional expenses and continued phone net losses to weigh on service revenue and EBITDA metrics in 2023," Luebchow said, adding that more competitive headwinds are ahead with the continued success of cable, T-Mobile and potentially Dish Network (DISH).