While the proposed merger of Sprint Corp S and T-Mobile US Inc TMUS and the ongoing move to a 5G future will dominate the telecom landscape in 2020, it's another player — the sector's iconic link to the past, AT&T Inc. T — that investors should watch in the coming year, Bank of America said Tuesday.
Bank of America's David Barden said a discounted AT&T is the firm's top pick in wireline and wireless telecom services for 2020. His positive view is based on several factors, including:
- Accelerating earnings growth based on new cost-cutting.
- Doubt on the street on AT&T's ability to execute on earnings.
- Heavily discounted valuation relative to the market.
- Improving cash flow.
AT&T recently announced a $4 billion accelerated stock repurchase program as part of a plan to buy back about 3% of shares over three years. That should support at least the current price, Barden wrote in a note. He also cited some strong performance metrics, noting AT&T was the best performing wireless stock of 2019, up 35% year to date.
How Many Players Is Biggest Issue In Market
AT&T's positive momentum may be overshadowed by other issues in the wireless market in the coming year. The Sprint-T-Mobile merger will be front and center, deciding whether the United States will have three or four wireless providers. That "is likely the most important thing that will happen to the industry in the year, perhaps the decade," said Barden.
5G Not Quite Yet
The super-fast speeds and low latency of true 5G won't be fully realized for most consumers in the coming year, Barden predicts — though it will be the talk of the industry as companies claim better benefits to come.
"What’s really changing in ’20 is that plain old 4G LTE will become faster as the latest technologies and new spectrum combine in a growing number of markets," Barden wrote.
AT&T's stock traded down slightly Tuesday at $38.52 per share.
Photo by Tdorante10/Wikimedia.
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