AT&T stock (NYSE:T) is not without its dangers, but Raymond James’ Frank Louthan predicts that the telecommunications firm will continue to gain ground on its chief competitor, Verizon Communications, over the next few months.
AT&T Stock Performance
After holding his rating on AT&T’s shares at Outperform since late 2019, the analyst upgraded his recommendation for the company’s stock to a Strong Buy on Monday. His upgrade comes after AT&T (NYSE:T) reported strong earnings, raised its forecast for full-year profit, and said it feels confident that it can deliver the $14 billion in free cash flow it had forecast for this year. These developments reassured investors during a turbulent time for the markets. His upgrade comes after AT&T reported strong earnings.
According to Louthan, the “present operating performance of the two enterprises” serves as the foundation for his argument. AT&T (NYSE:T) is performing far better than Verizon in terms of attracting wireless subscribers, improving profits growth, and growing its profit margins, according to him. Both Verizon and AT&T are aggressively promoting their services in a market that is very competitive.
During the third quarter, AT&T saw a net increase of 708,000 postpaid phone users, which they announced. In the meantime, Verizon’s subscriber growth was hampered by a loss of 189,000 accounts in its consumer division, which came after a loss of 215,000 accounts in the company’s consumer division in the previous quarter. At the end of the third month of the fiscal year, the firm had a net increase of 8,000 postpaid phone users.
AT&T stock is viewed as having good aspects by more than just Louthan alone. On Friday, the investment analyst Greg Miller of Truist raised his recommendation on AT&T’s shares from Hold to Buy for the first time in over two years. He noted the fact that the corporation was concentrating on its core activities rather than making acquisitions of companies that were just tangentially linked.
AT&T has spent billions of dollars on purchases over the years, including $66 billion in 2015 for the acquisition of DirecTV and $106 billion in 2018 for the acquisition of Time Warner. In the end, it divested itself of DirecTV in 2021 and then sold off WarnerMedia in this year.
While Louthan anticipates that the firm will generate $19 billion in free cash flow in 2023, Miller believes that the company will be able to generate more than $17 billion. The corporation has set a goal of $20 billion, although the average estimate on Wall Street is just $16.95 billion at this time. According to him, if that projection turns out to be incorrect, it might put some doubt on Verizon’s ability to maintain its dividend payments, invest in the company, and pay down its debt.
Investors should also be aware that telecom stocks are not the greatest selections to make during an economic downturn. This is significant considering the possibility of a recession happening in the near future. However, Louthan believes that risk has already been included into AT&T’s stock price because the company’s price to earnings ratio is already lower than its five-year norm.
“Taking everything into consideration, we think that the relative risk/reward continues to be increasingly favorable for AT&T, and as a result, we are raising our rating commensurately.” according to the expert at Raymond James.
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Author Marianna Vilchez 
