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AT&T Gets a Lift as Analysts Say the Stock is Cheap


imagePhotograph by Tim Boyle/Bloomberg

Two Wall Street analysts believe AT&T stock is due for a turnaround after its big drop so far this year.

On Friday, AT&T stock rose 2.2% a day after the company assured financial analysts that it would maintain its dividend and use its excess cash to lower its debt load.

The company's shares rallied 1.7% to $31.77 on Monday, but are still down about 18% year to date.

JPMorgan Chase raised its rating for AT&T shares to Overweight from Neutral, citing the wireless company's low valuation.

"After our recent management meetings and the company's analyst meeting we came away with a better understanding of expectations around organic growth as well as how AT&T plans to de-lever the business using organic FCF as well as asset sales," JPMorgan analyst Philip Cusick wrote on Monday, referring to free cash flow. "AT&T looks to us like it is trading like a permanently shrinking business" rather than one with stable revenue and growth in earnings before interest, taxes, depreciation and amortization, or Ebitda, expected in 2019.

Cusick reaffirmed his $38 price target for AT&T stock.

The analyst said AT&T trades at a "substantial discount" to Verizon Communications. Verizon trades at 13 times his forecast for 2019 earnings, compared with AT&T at just 8.8 times. He said AT&T also has an attractive dividend yield of more than 6%.

In similar fashion, Cowen analyst Colby Synesael upgraded AT&T to Outperform from Market Perform.

"We think [AT&T's] plan laid out to get to Entertainment Ebitda stability appears credible, the dividend is safe and the stock is cheap on multiple metrics," he wrote on Monday.

Synesael raised his price target for the stock to $36 from $34.

Write to Tae Kim at tae.kim@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Technology , Stocks



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