AT&T shares have dropped about 11% since a high on June 25, which Citi says presents a buying opportunity. The firm believes that the consensus estimate is too low for 2016 and that the stock is not reflecting the company's actual strength.
The firm also believes AT&T is safe due to synergies it will obtain from a merger with DirecTV (DTV) , according to TheFlyontheWall.com. The merger may also increase dividends.
Shares of AT&T were up 0.62% to $32.53 in early afternoon trading on Wednesday.
Separately, TheStreet Ratings team rates AT&T INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AT&T INC (T) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- T's revenue growth has slightly outpaced the industry average of 4.9%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $9,160.00 million or 13.50% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 3.45%.
- The gross profit margin for AT&T INC is rather high; currently it is at 54.14%. Regardless of T's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.22% trails the industry average.
- Even though the current debt-to-equity ratio is 1.31, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.86 is weak.
- AT&T INC's earnings per share declined by 14.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.19 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $1.19).
- You can view the full analysis from the report here: T Ratings Report