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AT&T Analyst Day: WarnerMedia Integration, Streaming On The Street's Mind

November 30, 2018 12:27 pm
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Analysts are parsing key questions about AT&T Inc. (NYSE:T) after the telecom company's analyst day, including the progress of the WarnerMedia integration and wireless services performance. 

The Analysts

  • Wells Fargo analyst Jennifer M. Fritzsche maintained an Overweight rating with a $32 price target.
  • Morgan Stanley analyst Simon Flannery maintained an Overweight rating with a $37 price target.

Streaming

The details of an upcoming streaming service tied to the integration with WarnerMedia have been released, with three tiers expected to be launched in late 2019. They include: 

  • Entry-level streaming for movies only.
  • Premium-level streaming for blockbuster movies and original content.
  • Bundle services to access much of WarnerMedia resources.

“No pricing was disclosed, but [WarnerMedia CEO John] Stankey was clear that other competitor content libraries may get less deep as WarnerMedia content is pulled back to the mothership,” Wells Fargo's Fritzsche said in a note.

In addition to streaming, the company remains bullish on wireless momentum going forward, the analyst said; AT&T considers the early opportunities to lie in enterprise.

“We continue to believe FirstNet could be the ‘ sleeper surprise’ of 2019 for T’s mobility segment. Fritzsche said, referring to the public safety broadband network. "Optically, we believe this could be a significant contributor to sub growth for next year (public safety adds will be in the gross add number). This seems to be a point which the Street may not be focused enough on, in our view.”

Growth, Integration

AT&T is expecting positive growth and momentum to carry over into 2019, as it has been able to adequately bolster subscribers while holding margins, said Morgan Stanley's Flannery. The telecom's revenue stability remains mixed and that dynamic will likely continue considering the pricing pressures that exist, he said. 

“Moving more positively from earlier comments this year on pricing pressures, AT&T has been seeing cross-selling benefits from FirstNet as relationships with first responder groups are broadening to wins with local and state governments.”

Latin American prospects in 2019 are mixed due to ongoing competitive pressures, the analyst said.

“The company seems to be focused on managing these segments for margins and FCF generation. Mexico wireless is expected to be EBITDA breakeven in 2019,and the FCF profile will be helped as the network rollout is now complete at covering 100 million POPs.”

Price Action

AT&T shares were up 2.21 percent at $31.24 at the time of publication Friday. 

Related Links:

AT&T's 5G Rollout, Time Warner Acquisition Among The Pillars Of Tigress Financial's Bull Thesis

BoA Upgrades AT&T: 'The Landscape Has Dramatically Changed'

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