Argus boosts AT&T to Buy, seeing new post-media focus and resilience
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Argus Research has upgraded AT&T (NYSE:T) to Buy, seeing a company focused on communications and moving beyond past missteps.
"With the spin-off of WarnerMedia to Discovery, AT&T has finally moved past its long sad foray into the media business," analyst Joseph Bonner said. "The company has also moved past multiple other asset divestitures and a substantial dividend cut in the last year."
Instead, the wireless business has been a star in 2022, he said, noting the company has added "substantial" subscribers despite a price increase - not as many as T-Mobile (TMUS), but better than "anemic numbers" at Verizon (VZ).
Promotions have helped, and while those are being throttled back, wireless is still the key revenue and profit driver at AT&T - and that business is likely to remain resilient in a recession, he said, particularly with AT&T's focused debt reduction and refinancing over the past few years.
The stock has begun to recover from a "market pummeling the company took in response to the companyâs strategic about-face on entertainment, the WarnerMedia spinoff, and the dividend cut," but its valuation is still below historical norms as well as peer averages, Bonner said.
"Investment spending on 5G and fiber broadband networks in addition to debt reduction are its critical strategic priorities in the near term, toward creating the underlying framework for sustainable long-term growth," he said.
The firm maintained its 2022 earnings per share estimate at $2.51 (vs. Street expectations for $2.61), but raised its 2023 forecast to $2.62 (above consensus for $2.57).
And with the upgrade to Buy, it's set a target price of $24, implying 24% upside.
AT&T Chief Operating Officer Jeff McElfresh used a conference talk this week to point to the strength of consumer demand despite some economic stress.