AT&T raised at RBC, has greater confidence in growth initiatives

Investing.com -- RBC Capital raised AT&T (NYSE:T ) to Outperform from Sector Perform in a note Monday, citing increased confidence in the company’s growth initiatives and prospects for shareholder returns. 

The firm also raised its price target for AT&T from $22 to $26.

The upgrade follows detailed guidance from AT&T’s recent Capital Markets Day, where the company outlined plans to eliminate legacy costs and leverage fiber investments. 

RBC Capital analysts noted, "Eliminating legacy costs and leveraging fiber investments strengthen our confidence in T’s performance beyond 2027."

Key changes in RBC's estimates include increased expectations for Mobility EBITDA, with estimates raised by 0.3% for FY25, 0.6% for FY26, and 1.3% for FY27. "We increase our Mobility EBITDA estimates...with a FY27 estimate of $40.3B," the note stated.

However, there was a significant reduction in Business Wireline EBITDA estimates, with expected stabilization not anticipated until the end of 2027. RBC reduced its FY27 estimate to $3.5B, down from a consensus of $4.1B.

Consumer fiber revenue estimates have been revised upward, driven by accelerated fiber deployment and cost savings from copper decommissioning. "We increase our Consumer Wireline EBITDA estimates by 7%/14%/22% in FY25/FY26/FY27, with FY27E EBITDA of $6.0B," RBC highlighted.

RBC also factored in proceeds from the anticipated DirecTV sale, estimating $5.4B in Q3 2025. Free cash flow estimates, excluding DirecTV, are projected at $16.1B for FY25, $17.3B for FY26, and $18.3B for FY27.

Looking beyond 2027, RBC expects AT&T’s fiber investments to drive substantial subscriber growth. 

The analysts forecast that fiber and converged offerings could add over 500,000 converged households by 2030, significantly enhancing AT&T’s market position. The continued reduction of copper-related costs is also seen as a positive long-term driver.

RBC concluded, "We raise our price target to $26 (from $22) and upgrade to Outperform (from Sector Perform) based on stronger confidence in AT&T’s growth and shareholder return profile vs. peers.”

 

Source: Investing.com