Judgment day is fast approaching for AT&T Inc. (NYSE:T), which is staring down a March 19 court date with the Department of Justice, which is suing to block its proposed buyout of Time Warner Inc (NYSE:TWX).
While the uncertainty surrounding the merger has kept some Wall Street analysts on the sidelines, at least one analyst says investors shouldn’t let the trial scare them away from AT&T stock.
The Analyst
Wells Fargo analyst Jennifer Fritzsche has reiterated an Outperform rating and $48 price target for AT&T.
The Thesis
According to Fritzsche, AT&T is firmly committed to completing the deal.
“While we appreciate history is against T in this fight, based on our legal contacts take, we still very much believe case law is on T's side,” Fritzsche said in a Friday note.
Either way, AT&T shareholders can expect to have an official decision by the judge overseeing the two-week trial by early May.
At this point, Wells Fargo estimates the market is expecting the deal to be blocked. The firm’s risk-arb team estimates the market is pricing in a 30 to 40 percent success rate for the merger.
Fritzsche says headline risk could certainly weigh on AT&T’s share price for now, but the stock doesn’t seem expensive at this point. AT&T is trading at about 10 times Wells Fargo’s 2019 EPS estimate. Fritzsche says recent commentary from management suggests AT&T may be well-positioned to accelerate its revenue growth in coming quarters, with or without Time Warner.
Price Action
AT&T stock traded around $36.49 on Friday.
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Photo courtesy of AT&T.
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