05. AT&T Inc. (NYSE:T)
Average Analyst Share Price Target Upside: 14.88%
Average Analyst Share Price Target: $22.33
Number five on our list of ten best telecom stocks to buy right now is AT&T Inc. (NYSE:T). AT&T Inc. (NYSE: T) has an average analyst price target of $22.33, indicating a potential upside of 14.88%. On July 24, AT&T Inc. (NYSE:T) reported earnings with normalized EPS of $0.57, in-line with expectations. Revenue came in at $29.80 billion, falling short of forecasts by $184.01 million. Despite the revenue miss, AT&T Inc. (NYSE:T) solid EPS performance and ongoing strategic initiatives suggest a focus on long-term growth and operational improvements. AT&T Inc. (NYSE:T) has a forward dividend yield of 5.71% with an annual payout of $1.11 and a payout ratio of 48.26%. AT&T Inc. (NYSE: T) has delivered a year-to-date price return of 16.33%, outperforming the S&P 500’s 13.93% return.
Miller Value Income Strategy made the following comment about AT&T Inc. (NYSE:T) in its Q3 2023 investor letter:
“Our third-largest holding at quarter end was AT&T Inc. (NYSE:T), a leading provider of communications and connectivity services in the US. At $15/share, the stock trades at the same price it did almost thirty years ago. The share price is much less interesting to us in relation to where it has traded in the past than in relation to how much cash the company generates and what management is doing with it. At just over 6x earnings, the stock trades near its lowest price-to-earnings (P/E) multiple ever, also representing close to its largest-ever P/E discount to the stock market. The business converts most of its earnings to free cash flow, implying a forward free cash flow yield north of 15%. Just under half of free cash flow is going toward the dividend (7.5% yield), while much of the balance is going to debt paydown. In other words, if the stock does not fall below its lowest-ever valuation, investors clip a rock-solid 7.5% in cash, while owning a growing portion of a very steady business as management reduces debt outstanding. A discounted cash flow model will suggest that intrinsic value for shares begins with a “2,” suggesting the stock is undervalued on an absolute basis. The lack of volatility in the underlying fundamentals also makes it unique when compared to many other things we own, which reduces the probability of permanent capital impairment and argues for a significant weight in the portfolio.
AT&T looks particularly attractive when compared to some of the larger names dominating the S&P 500. Compare the stock to Apple, for instance, whose revenues and profits are likely to shrink this year, even as it trades at 29x this year’s earnings estimate. The ongoing return to rationality and capital accountability, along with extreme valuations in the megacap tech stocks, have us more excited about our portfolio’s prospects than we can remember for quite some time. As always, we remain the largest investors and welcome any questions or comments.”
