AT&T is already well done by Wall Street, analysts say

AT&T Inc. has its act together in wireless, but it's already well understood by Wall Street, according to LightShed Partners analysts.

AT&T T has seen success with its wireless initiatives after refocusing its business on connectivity in the wake of ill-fated media ventures, and that progress is reflected in the stock's relative performance. Over the past year, AT&T's stock has outperformed Verizon Communications Inc.'s VZ, and its dividend yield has fallen below Verizon's, according to LightShed Partners analysts Walter Piecyk and Joe Galone.

The analysts said that the current sentiment is a bit different from late 2021, when the investor disdain for AT&T was perhaps best expressed by a consensus 2022 post-paid phone net add estimate of 900,000. AT&T had more than 2 million net additions that year.

The LightShed team expects AT&T to surpass T-Mobile US Inc. TMUS this year with its wireless-service revenue growth, but the analysts don't recommend AT&T's stock. They downgraded it to neutral from buy Tuesday.

The analysts projections for wireless-service revenue growth are ahead of AT&T's own forecast, but are barely above the consensus view, and they also embed specific risk. Piecyk and Galone wrote that AT&T's price increase would not be announced. Cable operators that no longer report wireless EBITDA earnings before interest, taxes, depreciation, and amortization losses could have a larger impact than we expect, as well as the rise of free line promotions. AT&T has to deal with its declining wireline business. While the wireline, which includes things like home internet and legacy landlines, is not as exciting as AT&T's wireless business, it still makes up about 35% of the company's revenue. That means that declines in this part of the business can lead to a slower growth for AT&T's overall service revenue.

Consumer fiber broadband is a good story, but it represents only 15% of the wireline at the end of 2022 and is not enough to offset the declines in the legacy consumer and enterprise businesses, Piecyk and Galone wrote. The joint venture with BlackRock is an innovative business model for an incumbent telco, but doesn't move the needle enough. They suggest that AT&T consider more transformative moves to exit declining wireline businesses and increase consumer wireless business size, since they note that bundling is the future of the industry.