AT&T Inc. (NYSE: T) shares have weakened more than 5% since the beginning of the 2022 year, even though the company reported solid fourth-quarter results in January.
Morgan Stanley has a positive view of AT&T
AT&T shares continue to trade near their lowest point since the global financial crisis after communications chief Jeff McElfresh raised new concerns about user growth in the wireless industry.
The company reported fourth-quarter results at the end of January; total revenue has decreased by 10.3% Y/Y to $41 billion while the non-GAAP EPS was $0.78 (beats by $0.03).
Total revenue has decreased below expectations ( beats by $550 million), and the company’s management said that it expects 2022 consolidated revenue growth in the low-single digits range compared to 2021 consolidated revenues of $153.2 billion.
Adjusted EPS for 2022 should be in the range between $3.10 to $3.15, and it is important to mention that AT&T plans to spend $24 billion on capital investments.
Morgan Stanley has a positive view of the shares of AT&T and reported that the upcoming spin-off of its shares for the Warner Bros. Discovery deal would unlock value in communications. Simon Flannery, an analyst from Morgan Stanley, added:
AT&T and Discovery have set expectations that they can close the $43 billion deal in mid-to-late April. AT&T investors will receive about 0.24 shares in Warner Bros. Discovery (“New Discovery”) on closing, and those shares are currently worth about $6.75 per AT&T share.
Morgan Stanley assigned a buy rating on AT&T shares with a $28 target price which implies more than 15% upside potential. AT&T has a strong position in the market; the company pays an attractive dividend and improves its business for long-term growth and advantage.
The company is targeting a future payout ratio of about 40% of free cash flow, AT&T trades at less than four times TTM EBITDA, and this company could deliver substantial shareholder value for many years to come.
$22 represents current support
AT&T’s stock price has fallen more than 10% after reaching the highest level in 2022 of $27.48 on January 19, and the current share price could be a good entry price for long-term investors.
Data source: tradingview.com
If the price falls even more in the upcoming period, every price in a range from $22 to $20 could be a very good opportunity to invest in AT&T stock.
Summary
AT&T trades at less than four times TTM EBITDA, and with a market capitalization of $165 billion, shares of this company represent a good value for the long-term investors. Morgan Stanley has a positive view of the shares of AT&T and reported that the upcoming spin-off of its shares for the Warner Bros. Discovery deal would unlock value in communications.
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