Amir Rozwadowski, Barclays Research analyst, in a note to clients on Tuesday upgraded AT&T Inc. T to Overweight from Equal weight and increased the price target to $39 from $34 per share arguing that when the company completes its acquisition of DIRECTV DTV will lead to a boost in earnings going forward.
Rozwadowski was on CNBC recently to explain the reasons behind this upgrade.
Opportunities For Synergies And Driving Down Costs
"I think, with respect to AT&T the opportunity side here is really the DIRECTV acquisition, right?," Rozwadowski began. "I mean, when you look at a acquisition of this size and scope, it provides a lot of opportunities for synergies and driving down costs, providing other opportunities to up sell products. And what that does is it provide AT&T with a diversification avenue to really mitigate some of the risks associated with some of the competitive pressures in the marketplace."
Stocks Move Where Numbers Move
Rozwadowski was asked if it really matters that some of the benefits he highlighted are largely inorganic as pointed out by him in his note. He replied, "Well, I think that from our perspective we sort of believe that the stocks move where the numbers move and, so, certainly AT&T is buying a lot of these numbers through its acquisitions."
"There are longer term opportunities to integrate and synergize DirecTV's product offerings through the other AT&T umbrella. But if the numbers are moving in the right direction - which we believe that they are - after the close of the acquisition, the stock should tend to follow that," Rozwadowski said.
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