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Analysts Raise AT&T’s Price Target after Q2 Results

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AT&T (T) reported its second-quarter results before markets opened on Wednesday. The company’s adjusted EPS fell 2.2% YoY (year-over-year) to $0.89 in the quarter, meeting analysts’ average estimate of $0.89. AT&T’s revenue rose 15.3% YoY to $45.0 billion, exceeding analysts’ estimate.

Analysts’ price targets for AT&T

On Thursday, Raymond James and JPMorgan Chase raised their price targets for AT&T stock, from $34 to $35 and $38 to $39, respectively. Similarly, Credit Suisse upgraded AT&T to “neutral” from “underweight.”

Of the 28 Reuters-surveyed analysts covering AT&T, 15 recommend “buy,” 12 recommend “hold,” and one recommends “sell.” Their average 12-month target price of $34.46 for the stock implies a 0.9% rise from its July 26 closing price of $34.15. Their median price target for the stock is $35.

Growth in key metrics

In the second quarter, AT&T reported better-than-expected customer growth. The telecom company added net 72,000 postpaid phone customers, surpassing analysts’ expectation of 27,000 net additions. It also gained net 341,000 prepaid customers. However, the company lost nearly one million pay-TV and over-the-top video customers.

AT&T’s 2019 outlook

In fiscal 2019, AT&T expects low-single-digit adjusted EPS growth. The company raised its free cash flow guidance to $28 billion from $26 billion. It expects gross capital expenditure of about $23 billion, excluding expected FirstNet reimbursements of $1 billion. AT&T also plans to reduce its leverage multiple to approximately 2.5x by the end of this year.

Stock returns

As of Friday, AT&T stock had risen 19.7% year-to-date and 12.5% in the last 12 months. The stock is trading 27.4% above its 52-week low of $26.80, and just 0.6% below its 52-week high of $34.37. While AT&T’s stock performance has been impressive this year, the stock has fallen 21.9% in the last three years and 4.3% in the past five years.

Rivals T-Mobile (TMUS) and Sprint (S) have risen 32.5% and 37.3%, respectively, year-to-date. On Friday, T-Mobile received approval from the US Department of Justice to purchase Sprint for $26.5 billion. However, the transaction still faces some challenges. See T-Mobile–Sprint Merger Faces More Uncertainty and T-Mobile: A Look at Q2 Results as It Awaits Merger Approval to learn more.

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