Guggenheim, RayJay Remain AT&T Bulls Despite Q1 Video Sub Losses

AT&T Inc. T reported first-quarter results Wednesday that were broadly in-line with expectations, but marred by staggering linear video losses.  

The Analysts

Guggenheim Securities’ Mike McCormack maintained a Buy on AT&T with a $35 price target.

Raymond James’ Frank Louthan reiterated an Outperform rating and $34 price target.

The Thesis

AT&T reported first-quarter revenue and EBITDA of $44.8 billion and $14.8 billion, respectively. The results showed slightly weaker wireless and business wireline EBITDA, offset by a rebound in entertainment margins, Guggenheim's McCormack said in a Thursday note. 

The analyst raised the total revenue estimate for the second quarter by 1.6 percent to $45.1 billion, saying that the revision is mostly on account of higher wireless revenue. Guggenheim raised its second-quarter EBITDA estimate by 2 percent to $15.4 billion and its EPS estimate by 1.4 percent to 91 cents,. 

Guggenheim raised its 2019 revenue estimate by 0.5 percent to $183.1 billion and its 2019 EBITDA estimate by 0.6 percent to $61.2 billion.

While lowering the postpaid handset net add estimate by 24.1 percent to 250,000, McCormack raised the total broadband net add estimate from negative 9,000 to positive 55,000.

AT&T’s stock came under pressure due to higher-than-expected video sub losses, Raymond James’ Louthan said in a Wednesday note.

The roll-off of promotional subs added last year and mixed marketing for the U-verse product explain this, the analyst said. 

“Bundling with fiber subscribers and so forth is likely to also bring stability as is the thin client lineup of video in the back half." 

AT&T is focusing on improving its 4G experience with carrier aggregation and 5GE launches while it waits for iPhone and Galaxy handsets to drive further demand, Louthan said. The company has access to a substantial customer base due to the FirstNet opportunity, he said. 

In the event the deal between Sprint Corp S and T-Mobile US Inc TMUS fails, AT&T would have an even larger market share in rural areas as it builds out new spectrum and FirstNet over the next couple of years, the analyst said. 

Raymond James lowered its 2019 EBITDA estimate from $60 billion to $59.7 billion and its 2019 EPS estimate from $3.59 to $3.57. 

Price Action

AT&T shares were sliding by 1.3 percent to $30.38 at the time of publication Thursday. 

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