On Thursday, JPMorgan (NYSE:JPM) updated its stance on AT&T (NYSE:T), raising the price target to $24 from the previous $21, while keeping an Overweight rating on the stock. The firm's positive outlook follows AT&T's strong second-quarter performance, which was marked by a significant increase in postpaid phone customers and consistent net additions to its fiber broadband service.
AT&T has confirmed it is on track to achieve its leverage goal of 2.5 times by the first half of 2025. This financial positioning is expected to provide the company with flexibility to adjust its capital return strategy, potentially increasing buybacks, while continuing to invest in growth areas such as further fiber deployments.
The telecommunications giant's strategy of offering both wireless and fiber services is seen as a key advantage for future market share expansion. AT&T revealed that nearly 40% of its fiber households also subscribe to its wireless services, with a share of postpaid phone subscribers around 500 basis points above the national average within its fiber footprint.
The company's approach to growth includes not only organic fiber buildouts but also "capital light" partnerships with open access providers. This strategy is viewed by JPMorgan as a low-risk move that promises attractive long-term returns. AT&T is highlighted as a top pick and a value investment on the J.P. Morgan US Equity Analyst Focus List.
JPMorgan's revised price target of $24 is based on expectations of 9.4 times the company's estimated 2025 free cash flow and 6.4 times its estimated 2025 enterprise value to EBITDA. This is an increase from the previous valuation of 7.8 times and 5.9 times the 2024 estimates, respectively.
In other recent news, AT&T has been under the spotlight due to a variety of developments. The telecom giant recently reported Q2 2024 results that met expectations, with significant strides in postpaid phone additions, customer retention, and higher-than-anticipated average revenue per user.
TD Cowen updated its stance on AT&T, raising the price target to $23.00 while maintaining a Hold rating. Evercore ISI also upgraded its price target for AT&T, reflecting a positive outlook on the company's future subscriber growth.
However, not all recent news was positive. AT&T faced significant security breaches, with unauthorized downloads affecting approximately 109 million customer accounts. This breach led to a Senate inquiry and raised concerns about the protection of customer information within the company.
InvestingPro Insights
Continuing the discussion on AT&T's promising outlook, recent data from InvestingPro underscores the company's robust financial health and market position. With a market capitalization of $137.38 billion, AT&T is a heavyweight in the telecommunications sector. The company has shown a commitment to rewarding shareholders, boasting a high dividend yield of 5.79% as of the last recorded date, which aligns with its history of maintaining dividend payments for an impressive 41 consecutive years. This enduring strategy of shareholder returns is further supported by AT&T's valuation, which suggests a strong free cash flow yield.
InvestingPro Tips also highlight that AT&T is a prominent player in the Diversified Telecommunication Services industry, which may be a factor in the stock's low price volatility. Additionally, the company has been profitable over the last twelve months, which is a reassuring sign for investors looking for stable earnings amidst a volatile market. For those interested in further insights, there are additional InvestingPro Tips available on their platform, offering deeper analysis and data points that could help refine investment decisions. To access these insights, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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