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Bank of America Merrill Lynch Is Bullish on AT&T: Here’s Why


Jun. 27 2019, Updated 8:53 a.m. ET

Analysts’ recommendations

Of the 29 analysts covering AT&T (T), 14 have rated the stock as a “buy,” while 13 have given it “holds.” Two analysts have recommended “sells” on the stock.

Analysts have a target price of $33.09 on the stock, which implies a potential upside of 1.6% from its closing price of $32.58 on June 24.

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AT&T stock rose 0.4% and closed at $32.58 on June 24. Its stock has gained nearly 18% year-to-date, nearly in line with the S&P 500, which is up 17.5% in the same period.

AT&T stock is currently trading at 9.15x its 2019 estimated EPS of $3.56 and 8.9x its 2020 estimated EPS of $3.63, which is unattractive based on its projected growth rates of ~1.18% and ~1.97%, respectively, for those periods. Moreover, AT&T’s revenue is expected to rise 7.24% in 2019 and 0.29% in 2020.

Bank of America is optimistic on AT&T

Despite AT&T’s unattractive valuation, Bank of America Merrill Lynch analyst David Barden expressed his optimism about the stock at the Bank of America Merrill Lynch Global Telecom & Media Conference on June 19. Bank of America maintained a “buy” rating and a $37 price target on AT&T.

The analyst is upbeat about AT&T’s wireless business and believes that AT&T’s broadband business will contribute to its earnings. According to the analyst, the huge subscriber losses in the video business aren’t a concern, as the subscribers lost have thin margins, and profits won’t be affected.

Barden is also optimistic about postpaid subscriber net additions. He said, “The network has never performed better.” AT&T also has attractive cash flows and dividend yields.


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