AT&T is a buy after a recent pullback, says KeyBanc

KeyBanc Capital Markets upgraded AT&T to Overweight from Sector Weight, setting a $30 price target that implies approximately 19% upside from its Tuesday close. Analyst Brandon Nispel views the recent 15% pullback as an attractive entry point, dismissing competitive wireless concerns as overblown. The upgrade is predicated on AT&T's strategic positioning, strong capital return, and compelling growth outlook, particularly in its convergence business combining 5G wireless and fiber networks, alongside projected adjusted EBITDA growth accelerating to 5% by 2027-2028.

Analysis

KeyBanc Capital Markets upgraded AT&T (T) to Overweight with a $30 price target, signaling approximately 19% upside from its recent close. Analyst Brandon Nispel attributes the recent 15% share pullback to "overblown" competitive wireless concerns, asserting that AT&T's strategic positioning, growth outlook, and capital return justify a historical average multiple. This upgrade reflects a bullish sentiment, aligning with the broader analyst consensus where 17 of 28 analysts rate T a Buy or Strong Buy.

The upgrade is underpinned by AT&T's compelling growth outlook, particularly in its convergence business combining 5G wireless and wireline fiber networks. KeyBanc highlights AT&T's plan to expand fiber to 60 million homes and businesses, alongside its recent 3.45GHz spectrum acquisition from Echostar, positioning it as a leader in this segment. Nispel projects convergence subscribers to nearly double from 6.2 million by end-2025 to 12 million by 2030.

Financially, AT&T's adjusted EBITDA is expected to grow 3% in 2025, accelerating to 4% in 2026, and reaching closer to 5% in 2027-2028. This accelerating EBITDA growth, coupled with the company's solid capital return, forms a core part of the investment thesis. The positive sentiment and moderate market impact suggest the upgrade is being received favorably by investors.

Key Decisions for Investors

• Consider the recent 15% pullback as a potential entry point, given KeyBanc's assessment of competitive concerns as "overblown" and the implied 19% upside to their $30 price target.
• Monitor AT&T's execution on its convergence strategy, specifically the expansion of fiber to 60 million homes and the growth in converged subscribers, as these are key drivers for future growth and valuation.
• Evaluate the accelerating adjusted EBITDA growth projections (3% in 2025 to 5% by 2027-2028) and the company's capital return policy as critical components supporting the long-term investment thesis.