AT&T stock could be a long-term play even as its entertainment business struggles, says brokerage Raymond James, which upgraded the telecom and media giant to outperform on Friday. AT&T stock climbed in early trading.
“The outlook for positive earnings growth combined with a strong de-levering story are likely to drive the shares to outperform,” Raymond James analyst Frank Louthan said in a report. “We believe the subscriber losses at DirecTV Now will likely continue and we have adjusted expectations,” he added.
In the December quarter, AT&T said its DirecTV satellite TV business lost 403,000 subscribers, more than the 298,000 analysts had forecast. AT&T also shed 267,000 DirectTV Now online video subscribers as it scaled back marketing promotions.
AT&T Stock Lags Verizon Stock
“We believe that global accounts looking at relative value within a benchmark are likely to patiently wait for the de-levering to be achieved and risk averse investors to return to the name,” Louthan said. “Where we could be wrong is if investors focus more on the subscriber metrics as AT&T reports over the course of the year and trades off that.”
AT&T stock has lagged Verizon Communications (VZ), which is up 21% from a year ago. Both Verizon stock and AT&T stock are viewed as high-dividend paying companies. Verizon stock rose 0.3%, near 58.20, on Friday.
AT&T acquired Time Warner in June 2018.
Follow Reinhardt Krause on Twitter @IBD_RKrause.
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