What happened
Shares of AT&T (NYSE: T) rose on Monday, following positive analyst commentary. By the close of trading, the telecom's stock price was up 2.4% after rising as much as 4.4% earlier in the day.
So what
Raymond James analyst Frank Louthan placed a strong buy rating on AT&T's stock. He sees the wireless carrier's share price surging roughly 37% to $24.
Louthan expects AT&T to continue to outperform its rival Verizon (NYSE: VZ) in the coming quarters. In the hotly contested race for postpaid phone subscribers (who tend to be wireless companies' most profitable customers), AT&T has jumped ahead of its longtime competitor. AT&T won 708,000 new postpaid phone subscribers in the third quarter, while Verizon gained only 8,000.
He applauded AT&T's moves to streamline its business. After merging its Warner media assets with Discovery in April to form Warner Bros. Discovery, AT&T has refocused on its core wireless business. The company can now devote its bountiful cash flow toward strengthening its 5G network and broadband internet operations.
"We believe the AT&T story is simplifying, which will further attract investors," Louthan said.
Now what
During its third-quarterearnings call CEO John Stankey reiterated AT&T's free cash flow target of $14 billion in 2022, which he said was "more than ample" to fund the company's expected dividend payments of $8 billion. Louthan believes that free cash flow could grow to $19 billion in 2023, which would make it easier for AT&T to pay down its debt and perhaps increase its cash payout to investors.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications and Warner Bros. Discovery, Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
