AT&T’s (T) pullback off its five-and-a-half year high presents a compelling buying opportunity, says KeyBanc, as the telecom’s plan to reach 60M fiber homes and businesses and recent spectrum acquisition from Echostar (SATS) positions the company as the “clear leader in convergence.”
“Ultimately, we think AT&T has ~6.2M converged by the end of 2025, which we think should nearly double to ~12M by 2030, compared to less than 10M for the next closest competitor,” KeyBanc analysts Brandon Nispel and Matt Sbriglio said in their upgrade to AT&T (T) to Overweight from Sector Weight.
In respect of this “fundamental growth” outlook, Nispel and Sbriglio expect AT&T’s (T) adjusted EBITDA to increase from ~3% in 2025 to nearly 5% in 2027/2028, driven by gains in mobility and broadband as well as cost savings.
“Paired with a solid capital return and reasonable valuation, we like this risk/reward,” they add, with the company’s compelling growth outlook and capital return warranting a $30 price target, a 19% upside to Tuesday’s closing price.
The capital return projection of $2.12 per shareholder in 2026 (~8.5% yield) looks “relatively attractive” to Nispel and Sbriglio and should grow over time. When paired with EPS growth expectations of 6%, this translates into a nearly 15% total return, a favorable comparison to Verizon (VZ) and T-Mobile (TMUS).
KeyBanc’s upgrade follows the company’s most recent quarterly results. AT&T (T) added 288,000 fiber subscribers, beating expectations, while wireless postpaid net additions of 405,000 were ahead of the 331,126 estimates.
“The strong postpaid phone net adds and low churn in mobility services, along with a 2.3% rise in mobility service revenues, means that the firm is experiencing continued strength in their core wireless business,” Seeking Alpha analyst and Investing Group Leading for Beyond the Wall, Danil Sereda said in his commentary.