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UPDATE: Raymond James Upgrades AT&T Following Acquisition Announcemnt

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In a report published Monday, Raymond James analyst Frank Louthan IV upgraded shares of AT&T (NYSE: T) from Market Perform to Outperform and set a $41.00 price target following Sunday's announcement that the company will acquire DIRECTV.

In a press release on Sunday, the companies announced that they have entered into a "definitive agreement" where AT&T will acquire DIRECTV in a stock and cash transaction for $95.00, based on AT&T's Friday closing price. The $95.00 price represents a 70/30 equity cash split of $66.50 per share in AT&T equity and $28.50 per share in cash.

The deal is expected to close within a year subject to DOJ, FCC and shareholder approval.

Raymond James remarked that shares will likely trade at a discount due to the approximate 12-month time frame and the potential regulatory overhang.

Louthan wrote, "We believe the broadband carrot Washington is so enamored with will get it over the line, given that AT&T has agreed to build high-speed internet to an additional 15 million homes as part of the transaction, will continue to offer DirecTV on a standalone basis for at least three years, and will offer a minimum 6 mbps standalone broadband offering where it has it today (which we can demonstrate is a perfectly acceptable throughput for OTT). There will still be three traditional video providers (DISH + Cable) in almost all overlapping markets, plus nascent OTT options further improving the odds of a favorable ruling."

The analyst sees revenue from video and broadband almost tripling with the deal, providing AT&T with a nationwide video footprint matching its wireless footprint. The combined company would have approximately 26 million video subscribers and 16.5 million broadband subs versus Comcast's approximate 29 million video subscribers post its transactions and 27 million broadband subs.

AT&T shares closed at $36.90 on Friday. The stock was up as much as a half of a percent to $36.94 in Monday's pre-market trading before falling to $35.64. Shares are currently trading at $35.88, down more than 2.8 percent.

Latest Ratings for T

DateFirmActionFromTo
Nov 2019DowngradesBuyHold
Nov 2019MaintainsBuy
Nov 2019DowngradesBuyHold

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View the Latest Analyst Ratings

Posted-In: Frank Louthan Raymond JamesAnalyst Color M&A News Upgrades Analyst Ratings

 

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