BofA Bullish On AT&T: 'The Network Has Never Performed Better'

AT&T Inc. T has attractive cash flow and dividend yields and is upbeat on its wireless business, according to Bank of America Merrill Lynch. 

The Analyst

David Barden maintained a Buy rating on AT&T with a $37 price target.

The Thesis

After meeting David Christopher, the president of AT&T’s mobility and entertainment groups, BofA came away unconcerned about the stock's lower valuation and subscription losses in its video business, Barden said in a Monday note. (See his track record here.) 

Many departing subscribers generate very slim margins, the analyst said in a note issued after the Global Telecom conference.

“So while the sub losses are large in absolute terms, the profitability of the segment is relatively unaffected."

Broadband, Wireless Set for Growth

Barden is bullish on AT&T's broadband business as an earnings booster. The company should hit about 14 million locations with fiber by mid-July, but so far only has about 3 million fiber broadband subscribers, which he said represents an opportunity

AT&T's Christopher believes the telecom could reach near 50% penetration, the analyst said. 

Barden also said Christopher was “decidedly upbeat” on the wireless business.

“This past 1Q marked the best postpaid net additions first quarter in years and the network has never performed better." 

AT&T has been following through on its main promises of retiring debt, growing mobility service revenue and prepaid and postpaid wireless subscribers while stabilizing earnings in the entertainment group, Barden said. 

“We believe the concerns baked into AT&T's record low valuations are overdone and that the company's cash flow and dividend yields are particularly attractive." 

Price Action

AT&T shares were up 0.37% at $32.57 at the time of publication Monday. 

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