Where Will AT&T Stock Be In 5 Years? Still A Strong Prospect With A Bright Future

Where Will AT&T Stock Be In 5 Years?: AT&T is one of the most recognizable wireless phone carriers in the U.S. The telecom and media conglomerate can be viewed as a haven when stock markets turn volatile. AT&T also maintains a high 6% annualized dividend yield amid relatively low-interest rates. Should investors consider buying AT&T stock?

AT&T

AT&T is a US-based multinational telecommunications company that’s involved in wireless, 5G technology, broadband internet, and fiber. Its products and services are used to connect businesses of all sizes across various industries, as well as transform how local and international markets communicate.

The company’s operations include AT&T Fiber, which reaches 18.5 million customers in the US, and FirstNet, America’s only purpose-built public safety network. The company has stated:

“Customers want great connectivity and they want it coupled with better value and service. Our goal is to give them multiple reasons to engage with us every day.”

According to Morningstar, the wireless business contributes about two-thirds of AT&T’s revenue, following the spinoff of WarnerMedia:

“The firm is the third-largest US wireless carrier, connecting 69 million postpaid and 18 million prepaid phone customers,” it stated. “Fixed-line enterprise services, which account for about 20% of revenue, include internet access, private networking, security, voice, and wholesale network capacity.”

AT&T also has a sizable presence in Mexico, serving 21 million customers. That business accounts for 2% of revenue.

AT&T Bulls Say

• Following a period of investment, AT&T will hold a nationwide 5G wireless network with a deep spectrum behind it and a fiber network capable of reaching nearly one-fourth of the United States.
• AT&T has the scale to remain a strong wireless competitor over the long term. With three dominant carriers, industry pricing should be more rational going forward.
• Combining wireless and fixed-line networks with new technologies and deep expertise makes AT&T a force in enterprise services.

AT&T Bears Say

• The cost of maintaining dominance in the wireless industry by controlling the spectrum has been exceptionally high over the years. AT&T has spent $40 billion over the past three years for licenses with few prospects for incremental revenue.
• Advancing technology will eventually swamp AT&T’s wireless business, enabling a host of firms to enter the market, further commoditizing this service.
• AT&T’s massive debt load will catch up with it. The firm carries far higher leverage than it historically has had, and its dividend payout remains high. Lead liabilities could be an additional burden.

About AT&T Inc.

AT&T Inc. is a holding company. The company is a provider of telecommunications and technology services globally. The company operates through two segments, namely communications and Latin America. The communications segment provides wireless and wireline telecom and broadband services to consumers located in the United States and globally. The business units of the communication segment include Mobility, Business Wireline, and consumer wireline.

Mobility provides nationwide wireless service and equipment. Business Wireline provides advanced ethernet-based fiber services, IP Voice, and managed professional services, as well as traditional voice and data services and related equipment to business customers.

The Communications segment is represented by AT&T, Cricket, AT&T TV, AT&T Fiber, and DirecTV brands. It includes wireless voice services and data communication infrastructure, video and targeted advertising services, broadband, wireline telecom services, etc.

The most popular brands of the WarnerMedia segment are HBO, HBO Max, HBO GO, and Cinemax. The segment includes the production, distribution, and licensing of television programming and feature films; distribution of digital and physical home entertainment products; production and distribution of mobile and console games and consumer products; and brand licensing and advertising services.

AT&T Inc.: AT&T Inc. is a parent company of DirecTV, SKY, and Unefon in the Latin America segment. The segment includes video entertainment, audio programming, postpaid, and prepaid wireless services.

AT&T Inc.: Here is some data on T stocks (New York Stock Exchange: T):

• Market cap: $206.92 billion
• Shares outstanding: 7.188 billion
• Public float: 7.13 billion
• P/E ratio: N/A
• Payout ratio: 65.82% (based on this year’s estimates)
• EPS: -$0.35
• Dividend Yield: 7.15%
• 52-week range: 26.35 – 33.88
• Annual dividend: $2.08 per share
• Forecast 12-month forward PEG Ratio: 2.97
• Average volume: 46.73 million shares
• Debt to equity ratio for the quarter ending in March 2021: 0.88

AT&T Earnings

AT&T Earnings: AT&T was expected to report fourth-quarter revenue of $31.4 billion but handily beat views, showing revenue of $40.96 billion on Jan. 25. Revenue rose 1% on a year-over-year basis, its first revenue growth in at least seven quarters. Meanwhile, the company missed bottom-line expectations with earnings per share of 56 cents. Earnings showed a 9% year-over-year increase, which is an acceleration from the prior quarter and a good sign.

The wireless services firm added 656,000 postpaid wireless phone customers during the quarter vs. estimates for a 645,000 gain. “Postpaid” subscribers usually have unlimited monthly data plans. But AT&T added 280,000 fiber broadband subscribers, missing analyst views for 330,000.

AT&T reported a full-year free cash flow of $14.1 billion, above analyst estimates of $13.78 billion and the firm’s prior forecast of $14 billion. The telecom giant churned out $6.1 billion in free cash flow for Q4, topping estimates of $5.37 billion. AT&T said it expects 2023 adjusted earnings of $2.40 a share at the midpoint of its outlook. That includes a negative 25-cent impact from higher interest rates and taxes. Analysts had projected 2023 earnings of $2.56 a share on revenue of $122.8 billion.

Slowing growth:

AT&T Earnings: Looking at the industry’s second-quarter results, we think earnings have lined up pretty closely with expectations. AT&T has seen growth slow. Management telegraphed this at a series of conferences in May and June, based on the loss of a government contract and the immediate impact of new rate plans from T-Mobile and Verizon. We think there’s more going on with AT&T, and that it needs to revamp some of its rate plans to better appeal to certain customer segments. However, this is a challenge of tactics and not long-term competitive positioning.

Toxic lead cables:

AT&T Earnings: This issue was widely discussed by both AT&T and Verizon. Management talked about the investigations it has undertaken at sites mentioned in the media and said the firm is going through corporate records to make sure it has located all lead-sheathed cables in its network. It appears that records are spottiest for the old MCI business. MCI acquired the Western Union telegraph network in the 1970s, but I suspect this network is far smaller than the core telephone network. AT&T was firm in stating that lead was used extensively in U.S. infrastructure during the first half of the 20th century and that handling it properly has long been part of the company’s protocols for workers and unions.

Plans for lead removal:

AT&T Earnings: We have trimmed our fair value estimate for AT&T slightly to $23 per share, primarily to account for its potential need to increase capital spending (all else equal) to respond to the lead issue. We believe the approach we’ve taken is appropriately conservative, given the uncertainty around this matter. We assume the firm will ramp up its removal and remediation efforts over the next couple of years, reaching $1 billion, with spending continuing for the foreseeable future at a consistent but manageable pace.

AT&T Stock vs Fisker stock: Its Value Score of F indicates it would be a bad pick for value investors. The financial health and growth prospects of FSR, demonstrate its potential to underperform the market. It currently has a Growth Score of F.

Key Factors That Affect At&T Stock Price in 2023 & Beyond

AT&T Stock Price in 2023: When predicting a company’s stock direction, it’s worth considering essential factors. They include financial outlook, earnings reports, the industry’s environment, and internal company news. However, every firm has certain factors that will make sense only for its future.

Poor Acquisitions

At&T Stock Price in 2023: In 2015, the company merged with DirecTV. Since then, the company has been suffering losses only. However, it refuses to fully divest the subsidiary. Additionally, analysts and investors blame the company for the lack of transformational ability. The company focuses on losing businesses and avoiding its core business of telecommunication services. If the company doesn’t get rid of unprofitable businesses, its shares will continue falling.

Challenging Competition

At&T Stock Price in 2023: Focusing on weak DirecTV, the company doesn’t pay enough attention to 5G and an expansion into streaming services. Although the Ookla Speedtest recognized AT&T’s network as the fastest for both 4G and 5G, its competitors, Verizon and T-Mobile, spend lots of money on upgrading their speed and quality. It will increase price competition. If the enterprise doesn’t refocus its business strategy, a new outlook on its stock rate won’t take place. However, the enterprise always works on its services, including a refund policy.

Expensive Dividends

AT&T Stock Price in 2023: AT&T pays 63% of free cash flow in dividends, while its rivals spend less. Verizon pays about 50%, and T-Mobile doesn’t pay dividends at all. Of course, it makes a firm’s shares attractive for investors. Just to compare, T shareholders earn $2.08 per share, and the average yield is about 6.6%, while the S&P 500’s average yield is 1.4%.

This situation is uncertain. On the one hand, good dividends will attract more investors, increasing the interest in the company and boosting its stocks. On the other hand, high payments affect the company’s finances. For instance, the firm has limited funds to improve the 5G segment. In 2021, the estimated CapEx is in the USD 21 billion range. At the same time, the company’s CEO claimed there is no need for dividend cuts for the growth of funds.

HBO Outlook

AT&T Stock Price in 2023: In 2021, the company is going to expand HBO Max. In June, the company is expected to launch 39 Latin American and Caribbean markets along with a service’s ad-supported version in the US. 21 markets should be launched in the second half of 2021. The expansion will result in 67 million and 70 million total HBO and HBO Max subscribers. If the company succeeds, the stocks will move up.

AT&T Stock Past Performance

AT&T Inc.: AT&T Stock was launched on October 12, 1984, in the stock market. The stock price at the time of listing was $4. After that, the stock made its all-time high of $42.7 on July 2, 1999. Since then, there have been many ups and downs in the stock, but the stock has not yet been able to hit its all-time high level.

AT&T Stock Forecast

The AT&T stock forecast for tomorrow is $ 15.82, which would represent a 0.51% gain compared to the current price. In the next week, the price of T is expected to increase by 3.98% and hit $ 16.37.

As far as the long-term AT&T stock forecast is concerned, here’s what our predictions are currently suggesting. These predictions are based on the 10-year average growth of T.

• AT&T stock prediction for 1 year from now: $ 14.29 (-9.24%)
• AT&T stock forecast for 2025: $ 15.44 (-2.79%)
• AT&T stock prediction for 2030: $ 14.38 (-9.43%)

AT&T Stock Price Forecast 2023-2024

AT&T Stock Forecast: AT&T’s price started in 2023 at $6.69. Today, AT&T traded at $15.88, so the price increased by 137% from the beginning of the year. The forecasted AT&T price at the end of 2023 is $16.79 – and the year-to-year change is +151%. The rise from today to year-end: +6%. In the first half of 2024, the AT&T price will climb to $17.64; in the second half, the price will add $0.85 and close the year at $18.49, which is +16% to the current price.

AT&T Stock Forecast 2025-2029

AT&T Stock Forecast: These five years would bring an increase: AT&T’s price would move from $18.49 to $36.75, which is up 99%. AT&T will start 2025 at $18.49, then soar to $22.65 within the first six months of the year and finish 2025 at $23.20. That means +46% from today.

AT&T Stock Forecast 2030-2034

AT&T Stock Forecast: In this period, the AT&T price would rise from $36.75 to $46.05, which is +25%. AT&T will start 2030 at $36.75, soar to $37.51 within the first half of the year, and finish 2030 at $38.30. It is about +141% from today.

Factors affecting AT&T’s stock price

The lead-sheathed cables in part of AT&T’s network may not be cause for concern. According to CEO John Stankey, independent experts “have given us no reason to believe these cables pose a public health risk.” But even so, AT&T is working with the U.S. Environmental Protection Agency to resolve the issue.

Facts about the extent of the lead problem, such as cleanup costs, are lacking right now. So an investment decision should be based on the company’s performance. One key consideration is AT&T’s free cash flow (FCF), which is indicative of the company’s ability to fund its dividend.

In the first quarter, AT&T reported $1 billion in FCF. This result contributed to the company’s share price decline since the amount was substantially less than the $2.8 billion generated in Q1 2022.

Despite the successes, one concerning factor is AT&T’s massive debt load. The company’s net debt stood at $132 billion at the end of Q2. Implementing a 5G network is not cheap. AT&T spent $35 billion over the past three years just to acquire the spectrum needed for its wireless network.

The company is working to reduce its debt while remaining committed to the dividend. AT&T is devoting a portion of its FCF toward debt reduction after paying dividends to achieve a net debt-to-adjusted EBITDA ratio in the range of 3x by the end of this year, and 2.5x by the first half of 2025.

AT&T stock vs Uber stock: Stocks affected included Uber Technologies Inc (NYSE: UBER), AT&T Inc. (NYSE: T), Morgan Stanley (NYSE: MS), and 81 other New York Stock Exchange-listed securities.

Where Will AT&T Stock Be In 5 Years?

Despite the DirecTV and Warner Media disposals, 78% of AT&T stock’s current value is in the telecoms businesses being retained. Telecoms is a commodity business, and AT&T Mobility shows the signs of a bad one, soon to be worse as cable operators expand there. The Consumer Wireless business has seen falling EBITDA even during COVID-19; the Business Wireline business is in structural decline. Higher CapEx after the spin-offs will not help much, as these will only close in H2 2022, and cable operators have already invested. At $29.23, AT&T stock has a post-deal Dividend Yield of 4.0%; the adjusted FCF Yield is 12.3%, but outweighed by qualitative concerns.

AT&T has announced two major disposals:

• A spin-off of Warner Media to merge with Discovery (DISCA); AT&T will receive $43bn and will own 70% of the new Warner Bros.
• Sale of DirecTV and related Video operations to private equity firm TPG; AT&T will receive $7.8bn and will own 71% of New DirecTV.

Once the two transactions have closed (expected in late 2021 and mid-2022 respectively), nearly all of AT&T’s EBITDA will be from Mobility, Consumer Wireline, and Business Wireline in the U.S.

What’s Next for AT&T Stock?

An argument for owning AT&T is that the wireless industry is still in the early stages of realizing the benefits of past consolidation, especially T-Mobile’s TMUS merger with Sprint. The level of competition is gradually diminishing, and we’re starting to see pricing creep up. AT&T has continued to defend its free cash flow target for 2023, and it should be in a position to at least hold cash flow stable next year, depending on what happens with its DirecTV partnership, and grow cash flow thereafter.

Predicting how sentiment will evolve around the lead contamination issue is difficult. Importantly, AT&T is already working to upgrade most of its copper network with fiber, and we suspect it will choose to prioritize decommissioning lead-sheathed cables.

We still have questions about the number of actual network route miles (miles traversed rather than length of cabling). This figure is likely to be more relevant in determining total potential replacement costs, especially if portions of buried cable ultimately need removal. The scope of any required environmental remediation work and legal liability also remains unknown, though this question would probably take years to settle if an entity pushed for more than basic removal and cleanup.

AT&T Stock vs Airbnb Stock: Airbnb shares fell 6.7% after RBC downgraded the stock to sector perform from outperform. The firm said Airbnb’s risk versus reward is “ultimately appearing too balanced at current levels to warrant the Outperform.”

Fair Value Estimate for AT&T Stock

With its 5-star rating, we believe AT&T’s stock is significantly undervalued compared to our long-term fair value estimate. Our $25 fair value estimate assumes AT&T will deliver modest revenue growth and gradually expanding margins over the next several years as its wireless and fiber network investments pay off. Our fair value estimate implies an enterprise value of 8 times our 2023 EBITDA estimate and a 7% free cash flow yield.

In wireless, we expect AT&T will slowly gain market share over the next few years, though the near term could prove bumpy as cable companies continue working to establish their wireless businesses. We believe postpaid revenue per phone customer will grow modestly amid a relatively stable competitive environment, hitting $60 per month in 2027 versus $55 in 2022. We estimate AT&T generates around $2 billion in revenue annually from connected devices like cars. We model this revenue roughly doubling over the next five years as things like edge computing gain adoption, but this estimate is highly uncertain.

In total, we expect wireless service revenue will increase 3%-4% annually on average through 2027, with wireless EBITDA margins holding in the low 40s, as cost-efficiency efforts and benefits from slower customer growth offset rising network operating costs.

Conclusion

AT&T’s Morningstar Uncertainty Rating remains at Medium due to potential liabilities associated with lead-sheathed cabling, leading to expected volatility for investors. The primary uncertainties facing AT&T are regulation and technological advancements. Regulation may intervene if AT&T’s services are insufficient or overpriced, especially in response to weak competition, potentially impacting its wireless and broadband services, which are considered crucial for social inclusion in employment and education. Moreover, AT&T is responsible for providing fixed-line phone services to millions of homes, including rural areas, which might require additional investments even with insufficient economic returns.

AT&T Stock vs Snowflake Stock: Both Snowflake and Datadog are well-positioned to benefit from this secular trend. However, investing in either of these companies is not without risks. Snowflake has also witnessed a significant year-over-year decline in its revenue growth rate, from 106% in fiscal 2022 to 70% in fiscal 2023, which ended on Jan. 31.

Where Will AT&T Stock Be In 5 Years? Frequently Asked Questions (FAQs)