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Macquarie Gives 5 Reasons To Own AT&T

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AT&T Inc. (NYSE: T) reported better than expected first quarter financial results on Wednesday. Following the earnings announcement, analysts at Macquarie upgraded the stock from Neutral to Outperform, setting a $37 price target.

According to a report issued Thursday, the analysts recommend buying shares of AT&T, following the earnings call and press reports Wednesday evening that suggested U.S. regulators will approve of the DIRECTV (NASDAQ: DTV) deal, while opposing to the bid Comcast Corporation (NASDAQ: CMCSA) made for DIRECTV. They suggest accumulating the stock “ahead of formal deal approvals and likely share ‘flowback’ from DTV holders.”

Related Link: Winners & Losers From The Failed Comcast-Time Warner Deal

Macquarie believes the stock could trade up about 10 percent, or sideways for a couple of months, but downside risk looks negligible. They feel “a confluence of factors and a 'mean reversion' trade relative to VZ, CMCSA and utilities will drive shares of T to $37 over the next year regardless of the overall market’s direction.”

5 Reasons To Hold AT&T Stock

The firm’s Buy thesis is based on five pillars:

1) For the first time in five years, out-year estimates for 2016 and beyond are rising.

2) The company’s dividend coverage on FCF rises to 134 percent in 2017, “even with full cash taxes.”

3) While the analysts expect Verizon Communications Inc. (NYSE: VZ) to witness substantial declines in EPS and FCF per share growth, they see AT&T retrieving positive figures

4) The AT&T-DIRECTV deal seems to have the regulators’ support that the Comcast-DIRECTV deal doesn’t.

5) The company has roughly $20 billion of assets they can sell to deleverage, and the analysts believe “there are credible buyers for those assets.”

Latest Ratings for T

DateFirmActionFromTo
Jan 2017Evercore ISI GroupInitiates Coverage OnHold
Jan 2017Deutsche BankDowngradesBuyHold
Dec 2016BairdUpgradesNeutralOutperform

View More Analyst Ratings for T
View the Latest Analyst Ratings

Posted-In: MacquarieAnalyst Color Upgrades Price Target Analyst Ratings Trading Ideas

 

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