Investors should buy AT & T after its strong third-quarter results, according to Truist. Analyst Greg Miller upgraded AT & T to buy from hold — saying the bank and its predecessors had kept the hold rating for more than 15 years — because of an “increasingly visible outlook” after the carrier beat profit and revenue expectations in its most recent quarter. “[We] are upgrading the shares of AT & T to Buy from Hold (have been Hold rated for more than 15 years) on the belief that trends of the past few quarters are increasingly likely to continue,” Miller wrote in a Friday note. The analyst reiterated a $21 price target, implying 25% upside from Thursday’s closing price of $16.74. The stock is down 0.8% in Friday premarket trading. Shares of AT & T have outperformed this year, down nearly 10% compared to the S & P 500’s roughly 23% drop. However, they have also underperformed over the past 15 years, with the stock down about 47% over the past 15 years, compared to the S & P 500’s gain of nearly 145% over the same time period, according to the note. Still, the analyst expects that AT & T’s return to its core business of wireless and wireline connectivity after divesting Warner Media and DirecTV will improve the company. Miller expects that improving operating trends will continue so that AT & T will generate more than $17.8 billion of free cash flow in 2023, and more than $19.6 billion free cash flow in 2024, meaning FCF yields of 14% and 15.4%, respectively, according to the note. “Now that it is increasingly clear that we are in fact on a trajectory to a $17.0+ billion 2023 FCF and beyond, we believe the company should be in an increasingly strong position to either return capital to shareholders or reinvest in the core business it is demonstrating success with,” read the note. —CNBC’s Michael Bloom contributed to this report.
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