On Wednesday, JPMorgan made a positive adjustment to shares of AT&T's (NYSE:T) financial outlook, raising the price target to $28 from the previous $25, while maintaining an Overweight rating on the stock.
The adjustment followed AT&T's Investor Day, which took place on Tuesday, where the company presented an improved multiyear service revenue and EBITDA guidance. AT&T also signaled a strong commitment to shareholder returns, expecting to deliver in excess of $40 billion by 2027, including over $20 billion in dividends and an equivalent amount in share repurchases.
AT&T's promising financial forecast is underpinned by an anticipated annual compound annual growth rate (CAGR) of 3.3% in EBITDA through 2027, slightly ahead of the company's own annual guidance of 3% or better.
JPMorgan's revised estimates reflect a 1% and 2% increase in EBITDA for 2026 and 2027, respectively. The telecom giant's strategy includes leveraging its organic fiber opportunities, bolstered by open access partnerships, and capturing a larger share of the broadband and mobile markets.
The company's focus on EBITDA margin expansion through cost reductions and service revenue growth is expected to contribute to a double-digit earnings per share (EPS) increase by 2027. Additionally, AT&T is projected to see a 9% CAGR in free cash flow (FCF) per share through the same period. JPMorgan's analysis suggests that these factors make AT&T an attractive investment at its current price levels.
JPMorgan anticipates that AT&T's unique growth strategy and clear path to enhanced capital returns will motivate investors to engage more actively with the stock. AT&T remains a top pick and a value selection on the J.P. Morgan US Equity Analyst Focus List.
The revised price target of $28 implies a valuation of 7.3 times the estimated 2025 enterprise value to EBITDA and 12.2 times the estimated 2025 free cash flow per share, compared to the current multiples of 6.7 and 10.4, respectively.
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