AT&T Just Posted A Double-Beat Quarter
"AT&T's Double-Digit Growth Expectations Could Drive Upside Potential"
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Current Price: $26.20
Dividend/Yield: $0.28/4.35%
Telecom companies like AT&T (T) often get criticized for their capital-intensive models and heavy debt loads.
And honestly—that criticism isn’t wrong.
But if you understand the business and buy at the right price, telecom can still be a reliable income play. With a 4%+ dividend yield and a forward P/E of ~11.4x, AT&T looks attractive on the surface.
The issue? Near-term upside may be limited.
Investment Thesis ✍🏾
Attractive income with a 4%+ yield
Reasonable valuation vs peers
Strong long-term outlook (EPS + FCF growth)
Near-term underperformance likely due to macro + debt + CAPEX
Q1 Earnings: A “Good, Not Great” Quarter 📊
AT&T delivered a double-beat:
EPS: $0.57 (+12% YoY)
Revenue: $31.5B (+3% YoY)
Net adds: 584K customers
Growth was driven by:
📶 Fiber expansion
📡 Advanced connectivity
🤝 Lumen acquisition
They’ve now posted: 6 consecutive quarters with 500K+ net adds. That’s solid execution—but nothing that screams hyper-growth.
Growth Drivers 🚀
AT&T is leaning heavily into Fiber + Connectivity:
+1M subscribers from Lumen deal
4M new fiber locations added
Target: 8M fiber locations by 2026
Other highlights:
Home internet revenue: +27% YoY
Strong momentum in Internet Air + Fiber adds
This is where the long-term story lives.
Outlook Through 2028 👀
Management is guiding for:
Low single-digit service revenue growth
3–4% EBITDA growth
Double-digit EPS growth
Free Cash Flow remains key:
2025 FCF: $16.6B
Q2 outlook: $4–4.5B
If execution holds: The stock could re-rate higher over time.
Dividends & Buybacks 💰
Income investors should like this:
Dividend yield: 4%+
2025 payout ratio: ~49% (healthy)
Total dividends paid: $8.1B
Shareholder returns target: $45B+ through 2028
2026 plan:
$8B in buybacks
Dividend looks safe and sustainable.
Key Risks Holding the Stock Back ⚠️
1. Legacy Business Decline
Legacy revenue: -25% YoY
Expected—but still a drag
2. Rising Debt & Leverage
Net debt: $126.4B (up from $117.4B)
Leverage: 2.71x → potentially 3.2x
Compared to peers:
Verizon (VZ): ~2.2x
T-Mobile (TMUS): ~2.4x
Higher leverage = lower flexibility in a volatile economy.
3. 🏗️ Heavy CAPEX Cycle
FCF pressure from fiber buildout
Ongoing infrastructure spending required
This is the nature of telecom—but it caps upside.
Valuation: Cheap… But Deserved? 💵
Forward P/E: 11.39x
5-year average: 9.05x
Peer comparison:
Verizon: ~9.4x
T-Mobile: ~18.7x
I believe AT&T could trade at: 13x–15x multiple over time.
But that requires:
Consistent EPS growth
Strong FCF execution
Debt stabilization
Competitive Threats 🌐
New disruption is forming:
Amazon (AMZN) + Globalstar (GSAT)
Satellite connectivity expansion
Integration with Apple devices
Satellite tech won’t replace telecom…but it could pressure long-term growth.
Price Outlook 🏷️
Near-term:
Economic uncertainty
Rising leverage
CAPEX pressure
Likely outcome: Muted performance through 2026
Long-term:
EPS growth
FCF expansion
Fiber monetization
Potential upside:
$30+ base case
$36 bull case (DCF target)
Bottom Line ✅
AT&T is a classic “get paid to wait” stock.
✔️ Strong income
✔️ Reasonable valuation
✔️ Long-term upside potential
But… Execution risk + macro uncertainty = limited near-term upside.
Do you think AT&T is worth the investment? Let me know in the comments.
Just a note to let readers know I will be going paid soon. Be on the lookout for the article laying out the details. Feel free to provide any feedback!
Happy Investing!
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Not financial advice. For educational purposes only. I am not a licensed professional. Do your own due diligence.
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