BofA says telecom stocks are under-owned, reinstates AT&T at Buy
Investing.com -- Bank of America reinstated coverage of the U.S. telecom sector, rating AT&T (NYSE:T) at Buy while assigning Neutral ratings to T-Mobile and Verizon (NYSE:VZ) in a note Monday.
The firm argues the industry is evolving and underappreciated, despite diverging strategies among the major players.
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Learn More Powered by Money.com - Yahoo may earn commission from the links above.“Telecom stocks are under-owned by institutional investors and overlooked as being in a sleepy, mature industry,” BofA said.
Yet they note that since 2023, AT&T delivered a total return of 84%, compared to 53% for TMUS and 27% for VZ, which trailed the S&P 500 by 800 basis points.
BofA believes company-specific dynamics now outweigh macro or sector-wide trends, and AT&T is best positioned.
“AT&T has the greatest flexibility to both compete effectively and return capital, which we view as the best opportunity for driving stock performance.”
The firm expects AT&T to deliver “the highest projected return of capital (dividends + buybacks) in 2026 at 7.2% of market cap.”
On Verizon, BofA stated that its acquisition of Frontier brings “execution uncertainty” and could weigh on free cash flow.
For T-Mobile, the firm sees limited room for upward estimate revisions: “T-Mobile’s focus on net addition targets, coupled with a premium valuation, leaves less room for positive estimate revisions and multiple expansion.”
BofA also cited competitive risks as broadband providers expand and cable companies step up their push into wireless.
“Territorial integrity is being tested, and competitive intensity is increasing,” analysts wrote. As a result, “we see less opportunity for price increases prevalent in 2024 to drive growth in the PxQ equation.”
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