On Wednesday, Scotiabank adjusted its financial outlook for telecommunications giant AT&T (NYSE: T) shares, increasing the price target to $23.00 from the previous figure of $22.50. The firm sustained its Sector Outperform rating on the stock, indicating a continued optimistic view of the company's performance.
The analyst from Scotiabank predicts a stable second-quarter consolidated revenue and anticipates a modest 1.8% growth in adjusted EBITDA. This expectation is based on the strength of AT&T's mobility and consumer wireline businesses, which is believed to counterbalance the ongoing downturn in the business segment.
The forecast includes the addition of 315,000 postpaid phone subscribers and a 0.9% increase in average revenue per user (ARPU), mirroring the growth seen in the previous quarter.
Looking forward into 2025, Scotiabank's positive outlook for AT&T is reinforced by the prospect of enhanced consumer wireline growth along with a consistent mid-single-digit EBITDA increase in the mobility sector. These factors are expected to significantly mitigate the impact of declining legacy business services.
The analyst also highlighted AT&T's improved financial stability and consistent capital expenditure as factors that could enable the management to resume rewarding shareholders. This could be through potential stock buybacks or a modest rise in dividends following a three-year pause.
The company's stock is deemed to be attractively priced, considering the anticipated growth in the coming years. Scotiabank's maintained Sector Outperform rating reflects confidence in AT&T's future performance and financial health.
In other recent news, AT&T has been in the spotlight with Deutsche Bank (ETR:DBKGn) raising the telecom giant's stock target due to optimism over AI integration. The bank's updated financial model reflects expectations of higher customer upgrade rates and industry switching activity. This is attributed to the integration of generative AI into Apple (NASDAQ:AAPL)'s iOS18, and the anticipation of AT&T resuming share repurchases in the second half of 2025.
In a significant development, AT&T announced quarterly dividends for both its common shares and two series of preferred stock. The declared dividend for the common shares is $0.27 per share, with shareholders of Series A and C preferred stocks set to receive $0.3125 and $0.296875 per depositary share, respectively.
AT&T's CEO, John Stankey, proposed that Big Tech companies contribute to the Universal Service Fund, a government initiative subsidizing telecom and broadband services. This could potentially lead to a new funding model for the program.
In the regulatory realm, the Federal Communications Commission (FCC) Chair, Jessica Rosenworcel, demanded strategies from major companies, including AT&T, to combat fraudulent political robocalls made using artificial intelligence.
Lastly, the National Football League (NFL) faces a substantial payout after a federal jury ordered it to compensate subscribers of its "Sunday Ticket" service over $4.7 billion in damages. This legal development has implications for AT&T, as DirecTV, a subsidiary of AT&T, was the former distributor of the service.
InvestingPro Insights
In alignment with Scotiabank's positive adjustment on AT&T's financial outlook, InvestingPro data and tips further substantiate the telecom giant's robust fiscal health and potential for shareholder value. With a substantial market capitalization of $134.8 billion and a compelling P/E ratio of 12.96, AT&T showcases its standing as a heavyweight in the industry. The company's dedication to shareholder returns is evident through its significant dividend yield of 5.99%, a testament to its financial stability and investor-friendly approach.
InvestingPro Tips highlight AT&T as a prominent player in the Diversified Telecommunication Services industry, with a perfect Piotroski Score of 9 indicating strong financial health. Moreover, the company has a track record of maintaining dividend payments for an impressive 41 consecutive years, underscoring its commitment to consistent shareholder returns. For investors seeking additional insights, there are currently over 10 additional InvestingPro Tips available, which can be accessed with an exclusive offer using the coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
AT&T's solid fundamentals are further supported by its attractive valuation, which suggests a strong free cash flow yield. This aligns with Scotiabank's forecast on the company's financial stability and the prospect of rewarding shareholders. The analyst's emphasis on AT&T's consumer wireline growth and the EBITDA increase in the mobility sector is complemented by the company's low price volatility, an InvestingPro Tip that indicates a stable investment for risk-averse shareholders.
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