AT&T Inc.’s stock presents the best “risk-adjusted upside” as the big wireless companies prepare to report earnings, according to Wells Fargo.
Analyst Eric Luebchow is upbeat about AT&T’s
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potential to issue a “solid” forecast “across the board” when it reports reports Wednesday morning. Namely, he’s optimistic about what the company will share on expectations for this year’s wireless service revenue growth, free cash flow and net additions.
Read: AT&T’s stock has been a massive laggard, but this new bull cheers 25% upside
In terms of wireless service revenue, Luebchow thinks AT&T
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will lead its peers with 4% growth, which he said is ahead of Wall Street expectations. Additionally, he’s looking for at least $18 billion in 2024 free cash flow — a key metric for AT&T investors given that it allows the company to support its dividend, which currently yields 6.6%.
“We believe AT&T’s wireless business remains the most balanced between subscriber and [average revenue per user] growth, which should contribute to +4% wireless [earnings before interest, taxes, depreciation and amortization] growth and optionality to push wireless pricing in 2024 as competition for wireless customers appears to have (largely) stabilized,” he said.
He further cheers the upside opportunity within broadband, noting that AT&T “should continue to outpace its cable peers” when it comes to average revenue per user in fiber. Meanwhile, “a nascent fixed wireless offering … could offer upside to broadband subscriber growth.”
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AT&T reports results Wednesday morning, a day after Verizon Communications Inc.
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Verizon takes home Wells Fargo’s “most improved” prize, but the company still isn’t necessarily sitting pretty.
The carrier “continues to improve share of gross adds,” with the potential for 150 basis points of year-over-year growth in the fourth quarter, but Verizon also “remains solidly behind [AT&T, T-Mobile] and cable in net add generation with churn remaining above its [telecommunications] peers,” Luebchow said.
T-Mobile US Inc.
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rounds out the week of wireless earnings with its Thursday afternoon report. The company “should maintain its position as the leader” in phone additions, Ebitda and free-cash-flow growth, Luebchow wrote, but he said that stock selling from Softbank “creates some modest liquidity pressure.”
