AT&T Inc. has its act together in wireless, but it’s already well understood by Wall Street, according to analysts at Lightshade Partners.
After refocusing its business on connectivity in the wake of ill-fated media ventures, AT&T
Tea,
It’s seen success with its wireless initiative, and that progress is reflected in the stock’s relative performance. As AT&T’s Stock Underperformed Verizon Communications Inc.
VZ,
“Over the past year, its dividend yield has fallen below Verizon’s — “as it should,” wrote Lightshade Partners analysts Walter Piecic and Joe Gallone.
Current sentiment “is vastly different from late 2021, when investor disdain for AT&T was perhaps best expressed by a consensus 2022 post-paid phone net add estimate. [900,000],” the analysts continued. AT&T recorded more than 2 million net additions that year.
The Lightshade team expects AT&T to outperform T-Mobile US Inc.
TMUS,
With its wireless-services revenue rising this year but despite the company’s “commendable” relative performance, analysts are no longer recommending AT&T’s stock. He turned it from buy to neutral on Tuesday.
Analysts’ estimates for wireless-services revenue growth are ahead of AT&T’s own forecast, but barely above the consensus outlook, and they also add “specific risks.”
“We believe the price increase has not been announced by AT&T,” wrote Piecic and Gallone. “Additionally, the growth of free line promotions may have a larger impact than we expect, especially when pushed by cable operators who no longer report wireless EBITDA. [earnings before interest, taxes, depreciation and amortization] Harm.
AT&T must also deal with its declining wireline business. While wireline, which includes things like home internet and legacy landlines, isn’t as exciting as AT&T’s wireless business, it still makes up about 35% of the company’s revenue. That means declines in this part of the business could lead to slower growth for AT&T’s overall service revenue.
“Consumer fiber broadband is a great story, but it represents only 15% of wireline at the end of 2022 and won’t be enough to offset declines in legacy consumer and enterprise businesses,” Piecek and Gallone wrote. “Gigapower” [joint venture] An innovative business model for an existing telco with BlackRock, but doesn’t quite move the needle.
He suggests that AT&T “consider more transformative moves to exit declining wireline businesses and structurally increase the size of its consumer wireless business,” because, he notes, bundling is the future of the industry.