AT&T stock upgrade as analyst welcomes strong growth in HBO Max subscribers
AT&T Inc. hasn’t had an easy time amid the pandemic, but an analyst believes the company has a better way forward.
Raymond James analyst Frank Louthan improved the stock to outperform the market’s performance on Monday, saying “there is more that can go well over the next 12 months than what can get worse for AT&T T,
“He had lowered the action earlier in the pandemic amid concerns about what the COVID-19 crisis could mean for the company’s WarnerMedia business, but now he’s more optimistic about the outlook and the future. business strategy.
“Add in the fact that stocks are heavily shorted, and we think that’s a recipe for the upside,” Louthan wrote. “Large cap value stocks are hard to come by, and we believe investors who can wait a few months for an average reversion while securing a 7% return should be rewarded for buying AT&T at current levels.”
The shares are up 1.4% in Monday trading.
One of the reasons for Louthan’s more optimistic view on stock is that AT&T is taking a new approach to its movie releases during the pandemic. Warner Bros. AT&T announced a month ago that it Would make 17 movies from its 2021 slate available on the company’s HBO Max streaming service the same day the films hit theaters. The the move is controversial because it upsets the traditional relationship between theater operators and studios, but it is a “well-informed bet”, according to Louthen.
“We think there is a lot more demand for [direct-to-consumer] theatrical releases that Hollywood insiders want to believe, and unless the world reverts to in-person box office attendance that rivals 2019 levels, the biggest mistake will be not charging enough for viewing at home, ”he wrote. “But that gives AT&T one thing that is a critical factor for the stock: undergrowth.”
Now that HBO Max has a greater presence on streaming platforms like Roku Inc. ROKU,
the company could see “significant follower gains,” benefiting its actions, Louthan said.
He conceded that the next quarterly report could be “unimpressive” with AT&T likely to bill for a crucial spectrum auction and provide results reflecting high marketing costs around Apple’s AAPL. Inc.,
IPhone 12 launched. But Louthan said concerns about AT&T’s record were “overblown.”
“With a FirstNet release nearing completion, increased awareness of HBO Max, and continued monetization of non-core assets in cards for 2021, we believe the company is on track to generate more than enough free cash flow for 1) cover its next C-band commitments; 2) controlling the leverage effect; and 3) maintain the dividend at or above the current level, ”he said in his note to clients. “Any increase in C-band leverage would be short-lived, in our view, and would effectively delay deleveraging for a year in exchange for critical specter.”
The stock has fallen 25% in the past 12 months, the S&P 500 SPX,
increased by 14%.
