Raymond James reiterates Strong Buy on AT&T stock, $33 target amid fiber strategy

Raymond James reiterated Strong Buy and a $33 price target on AT&T, saying the company is responding to SpaceX’s potential mobile-market entry with faster network buildout, bundling and network quality, despite pressure on postpaid ARPU. AT&T said it is losing about $400 million from the Mexico sale and cut network capex by $600 million through fiber-construction efficiencies; higher equipment costs and buy-now-pay-later activity are adding working-capital pressure. In its reported third-quarter 2026 results, AT&T beat forecasts with adjusted EPS of $0.65 versus $0.60 and revenue of $32.3 billion versus $31.69 billion, but shares declined in premarket trading as investors weighed debt, capex and one-time charges.

Analysis

The key issue for AT&T is whether bundling is improving customer lifetime value or merely buying retention with discounts. Lower reported ARPU can be acceptable if convergence lifts net additions and reduces churn, but it becomes a margin and valuation problem if service revenue per customer keeps falling without better retention or fiber uptake. The next useful read-through is cohort economics—not headline subscriber growth.

Satellite mobile is more likely to pressure coverage gaps, rural pricing and selected use cases before displacing dense-market terrestrial service. It could also complement AT&T through coverage or wholesale arrangements; treating SpaceX as an inevitable nationwide substitute overstates the near-term threat. Over 6–18 months, however, credible direct-to-device capability could weaken incumbents’ pricing power in underserved areas.

Capex efficiencies help cash generation only if build pace, service quality and fiber penetration hold. Meanwhile, device-financing and equipment-related working-capital use can make earnings beats translate less cleanly into free cash flow. The reported Mexico-related loss is a separate near-term offset, not evidence of deteriorating core unit economics. The premarket weakness despite reported beats is a reminder that investors may be focused on cash conversion, leverage and capital intensity rather than EPS delivery.

Key Decisions for Investors

• No immediate directional trade on the satellite comments alone. Treat them as a medium-term competitive watch item, not evidence of near-term AT&T subscriber displacement.
• For the next 1–3 months, monitor postpaid churn and net additions alongside service revenue per customer, fiber net additions/penetration, and free-cash-flow conversion. A sustained ARPU decline without better retention or fiber attachment would weaken the bundling thesis.
• Keep T on a conditional long watchlist rather than adding solely on the earnings beat: consider entry only if cash conversion and leverage are stable while fiber execution holds. Reassess if guidance or reported metrics show weaker free cash flow, rising churn, or deteriorating fiber economics.
• Falsifiers: evidence that satellite offerings are taking meaningful mobile customers or forcing broad price concessions; conversely, stable AT&T retention and improving fiber attachment would reduce the displacement concern. Verify the scope and persistence of equipment-related working-capital use before treating it as a structural cash-flow drag.