Goldman Sachs upgrades AT&T stock to Buy on fiber broadband growth

Investing.com - Goldman Sachs has assumed coverage on AT&T (NYSE:T) with a Buy rating and a price target of $32.00, citing strong fiber broadband growth prospects.

Goldman Sachs analyst Michael Ng highlighted AT&T’s guidance for mid-to-high teens fiber broadband growth for 2025 and mid-teens growth annually through 2027. The company reported 18% fiber revenue growth in 2024, with fiber connections growing 12% and ARPU increasing 4%.

AT&T’s overall broadband revenue grew 7% in 2024, as legacy declines partially offset growth in fiber. The company’s fiber subscriber growth was negatively impacted by a union strike in the third quarter of 2024, which caused AT&T to pause marketing its service in the southeast for approximately 30 days.

Goldman Sachs estimates AT&T’s fiber revenue will grow at a 15% three-year CAGR from 2024-2027. The firm projects that total Broadband revenue will account for approximately 90% of segment revenue by the end of the decade, up from 65% in 2019.

AT&T is guiding to low-to-mid teens EBITDA growth in 2025, with a double-digit CAGR through 2027, which Goldman Sachs believes should drive Consumer Wireline margins to approximately 40%, in line with cable peers Comcast and Charter.

In other recent news, AT&T Inc. has announced a significant move to acquire wireless spectrum licenses from EchoStar Corp. for approximately $23 billion. This acquisition, which is subject to regulatory approvals, includes around 30 MHz of mid-band and 20 MHz of low-band spectrum, covering over 400 markets across the United States. Following this announcement, S&P Global Ratings revised AT&T’s outlook to stable from positive, citing an anticipated increase in leverage due to the spectrum purchase. The acquisition is expected to push AT&T’s adjusted leverage to between 3.6x and 3.7x by 2026, a rise of about 0.5x from previous expectations.

Additionally, other companies such as T-Mobile and Elon Musk’s Starlink have shown interest in acquiring spectrum from EchoStar, highlighting the competitive nature of the communications sector. In corporate governance news, AT&T has appointed Kelly J. Grier to its Board of Directors, effective September 1, following Scott T. Ford’s retirement. Grier will join the Corporate Development and Finance and Human Resources Committees and will participate in the compensation program for non-employee directors. These developments underscore AT&T’s strategic efforts in strengthening its infrastructure and governance.

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