Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Shares of AT&T (T 0.67%) were pulling back today on a down day in the market and after MoffettNathanson downgraded the stock this morning.
AT&T shares were down 4.1% as of 2:19 p.m. ET.
Research firm MoffettNathanson lowered its rating on AT&T from market perform to underperform this morning for mostly valuation-based reasons.
Calling the telecom’s gains over the past few months a “dramatic bounce,” analyst Craig Moffett said he thinks AT&T is now overvalued. He sees rival Verizon as the better pick of the two, though he believes T-Mobile is the best of the three main U.S. carriers. Moffett maintained a price target of $17 on AT&T, implying a downside of 8% based on yesterday’s closing price.
Indeed, the No. 2 wireless carrier has struggled for a long time due to a series of wasteful acquisitions, including most recently its merger with Time Warner, which led to the spinoff of Warner Bros. Discovery, and challenges in growing its business.
Revenue, excluding last year’s spinoff of DirecTV and other video businesses, increased 3.1% to $30 billion, though the company grew adjusted earnings per share on a stand-alone AT&T basis from $0.62 to $0.68.
In addition to the challenges listed above, AT&T still carries a massive debt burden on its balance sheet, even after the Warner Bros. Discovery spinoff. It finished the third quarter with $134 billion in debt, and $93 billion in goodwill, which puts it at risk of future write-downs.
Most of its debt is fixed rate, which gives it some protection from rising interest rates, but it will likely pay higher rates to roll over debt as it matures.
While the company is highly profitable, the slow growth and debt servicing will remain an albatross for AT&T going forward.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US, Verizon Communications, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.
Market data powered by Xignite.
