What to Expect at AT&T's Analyst and Investor Day

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What to Expect at AT&T's Analyst and Investor Day

On Monday, Morgan Stanley reiterated an Equal Weight rating on AT&T Inc. (NYSE:T) with a price target of $19. This assessment comes ahead of the Analyst and Investor Day event that AT&T will host in Dallas on Tuesday, which will be streamed live at 9:00 PM Turkey time. Morgan Stanley analysts detailed their expectations regarding the event in a note sent to clients.

The event is expected to focus on the company's investment-driven growth strategy and capital allocation plans. "We expect the company to announce a new share repurchase program and an expanded fiber infrastructure build-out program. Additionally, the company may provide some preliminary financial expectations for 2025," the note to investors stated.

AT&T’s stock has risen by 16% in the past three months, outperforming Verizon's 6% increase despite recent hikes in long-term interest rates. AT&T's stock is currently trading at just 10 times earnings and offers a free cash flow (FCF) yield of over 10%. The company also presents a competitive dividend yield of around 5%. Morgan Stanley anticipates that AT&T will announce a multi-year share repurchase program in the range of $5-8 billion annually, which could equate to approximately 6% of shares over two years.

For 2024, AT&T forecasts approximately $17-18 billion in free cash flow, which includes about $3 billion from DTV. Dividends are expected to be slightly above $8 billion. The firm notes that AT&T aims to maintain a net debt to adjusted EBITDA ratio of approximately 2.5x over time, targeting this ratio in the first half of 2025.

Regarding fiber expansion, Morgan Stanley expects AT&T to increase its regional fiber infrastructure target from 30 million to 40-45 million consumer and business locations by the end of 2025. The company highlighted the benefits of the convergence between fiber and wireless services, mentioning that approximately 40% of fiber customers also subscribe to AT&T wireless services. Additional details on the joint Gigapower Fiber initiative with Blackrock, which initially targets 1.5 million fiber locations, and other out-of-region fiber partnerships are anticipated.

While formal guidance for 2025 may not be provided at the upcoming meeting, AT&T is expected to discuss key trends, including resilient wireless service revenue growth and steady growth potential in fiber-assisted consumer fixed-line services for the coming year. Morgan Stanley is also interested in AT&T’s cost efficiency opportunities, particularly those utilizing artificial intelligence for efficiency, which could contribute to moderate EBITDA growth in 2025.