By Sam Boughedda
In a note Wednesday, Morgan Stanley analyst Simon Flannery reiterated an Overweight rating and $22 price target on AT&T (NYSE:T), outlining a potential path to a 20% return from current levels.
"Greater visibility into the financial performance of the company post the spin-off of WarnerMedia, along with a potential for incremental return of capital and defensive sectors re-rating higher, could provide more upside for the AT&T stock," wrote Flannery.
Despite the market downturn in 2022, AT&T shares are performing well this year, having gained 13.5% so far.
The analyst pointed to AT&T's early April spin-off of WarnerMedia as a positive, allowing investors and management to focus on the core communications business.
"We believe the Remain co. offers investors an attractive valuation, a delevered balance sheet, and defensive positioning in a volatile market," said the analyst.
Flannery has a $27 bull case on AT&T shares and believes "further material upside would require investors to gain greater visibility into financial performance for 2023 and beyond, which could in turn open up the potential for additional return of capital. A more modest move to $24 would generate a total 12-month return of around 18%."