Can AT&T Stock Rise More in the Next 12 Months?

AT&T (T) stock received a target price upgrade on Monday. Investment firm Raymond James increased its target price on AT&T stock from $35 to $40, according to a report from The Fly. The revised target price implies an approximately 6.2% gain in AT&T stock from its current level of $37.66.

Why did AT&T stock rise?

Raymond James analyst Frank Louthan maintained an “outperform” rating on the stock. According to Barron’s report on Monday, Louthan “sees opportunities for AT&T to lift its earnings through operational improvements and increased buybacks, while mitigating the profit impact of continued video subscriber losses.” The analyst thinks that “AT&T can—and should—find billions of dollars of costs to cut next year” by improving operational efficiencies. Louthan expects a cost-saving plan for fiscal 2020 to be in place when the wireless carrier issues guidance after reporting its fourth-quarter results.

Elliott Management’s stake

Cost-cutting is one of the most actionable suggestions from Elliott Management. Last month, Elliott Management revealed that it owns shares worth about $3.2 billion in AT&T. The investment firm wants to shake up AT&T. Elliott Management recommended that AT&T sell non-core assets like DIRECTV to focus more on its core telecommunications business. AT&T has been losing pay-TV customers at a rapid pace over the last few quarters. In the third quarter, the company expects to lose 1.1 million traditional video customers. The hedge fund also criticized the telecom company for acquiring Time Warner.

According to a BloombergQuint report, “AT&T spokesman said DirecTV remains an important strategic asset, particularly because it will help distribute HBO Max, the company’s forthcoming streaming service.” The report also said, “DirecTV is also crucial to AT&T’s strategy to use data from viewers within its huge base of cellular and pay-TV customers to serve up targeted advertising that can compete with Google and Facebook Inc.”

Is AT&T stock overbought?

On Monday, AT&T closed the trading day at $37.66. Based on that closing price, the stock was trading as follows:

  • 8% above its 100-day moving average of $34.29
  • 9% above its 50-day moving average of $35.91
  • 3% above its 20-day moving average of $37.54

AT&T has a 14-day relative strength index score of 60, which shows that the stock is trading close to overbought territory.

AT&T’s quarterly dividend

On September 26, AT&T announced a quarterly dividend of $0.51 per share. The proposed dividend amount for the quarter rose 2% YoY (year-over-year). The company will pay the dividend on November 1. Shareholders need to hold the stock as of October 10 to be eligible for the dividend. At an annualized dividend per share of $2.04, AT&T’s dividend yield is 5.42% as of Monday. In comparison, Sprint (S) and T-Mobile (TMUS) don’t pay dividends.

Analysts’ recommendations and target price

Among the 28 analysts covering AT&T stock, 14 recommend a “buy,” while 13 recommend a “hold” compared to 15 and 12, respectively, last month. One analyst recommends a “sell,” which is the same as last month. The 12-month target price of $36.56 for AT&T stock implied a 2.9% downside potential based on its price on Monday. The median target price was $38.00.

T-Mobile is rated positively by 16 out of 20 analysts. The company’s mean target price of $88.44 implies a 12.7% upside from its current level of $78.48. Sprint is rated as a “buy” by one of the 18 analysts. The company’s target price of $6.68 implies 9.2% upside potential.

Analysts’ third-quarter forecast

AT&T is expected to release its third-quarter earnings results on October 23. Analysts expect an adjusted third-quarter EPS of $0.93 for AT&T, which implies a rise of 3.3% YoY. However, analysts expect the company’s third-quarter consolidated revenues to fall 1.4% to $45.11 billion.

Stock performance

AT&T stock rose 0.40% on Monday and closed the trading day at $37.66—40.52% above its 52-week low of $26.80 and 2.81% below the 52-week high of $38.75. At Monday’s closing price, AT&T had a market capitalization of $275.18 billion.

AT&T stock has risen 31.96% YTD (year-to-date). The stock has performed better than the broader market and its telecom peers. T-Mobile and Sprint have returned 23.38% and 5.15% YTD, respectively. Meanwhile, the S&P 500 Index has risen 12.56%.

For the last 14 days, AT&T’s MACD (moving average convergence divergence) is 0.05. In comparison, T-Mobile and Sprint’s 14-day MACD is -1.05 and -0.24, respectively. A negative MACD level indicates that a stock is in a downward trading trend, while a positive MACD level indicates an upward trading trend.

Read AT&T: Is It Time to Make Your Exit? and CWA Hits Back at Elliott for Its AT&T Critique to learn more. You can also read AT&T Faces More Activist Pressure.