AT&T Emerges As Top Telecom Stock For 2024: Analyst's '3 Big Reasons'

American Tower Corporation -3.32% Pre
AT&T Inc. -0.92% Pre
T-Mobile US, Inc. -0.02% Pre
Verizon Communications Inc. -0.85% Pre

American Tower Corporation

AMT

172.21

172.21

-3.32%

0.00% Pre

AT&T Inc.

T

16.09

16.09

-0.92%

0.00% Pre

T-Mobile US, Inc.

TMUS

159.79

159.79

-0.02%

0.00% Pre

Verizon Communications Inc.

VZ

39.77

39.77

-0.85%

0.00% Pre

The telecom sector hasn’t had its best year in 2023, particularly AT&T Inc (NYSE:T). The stock is down over 10% so far this year. Nonetheless, the markets appear to have something different in store for 2024. The biggest financial sector firms, namely Bank of America and Citigroup, are bullish on the stock.

David Barden, Bank of America Securities research analyst, discussed why AT&T is BofA’s top telecom pick for 2024 during CNBC’s ‘Squawk on the Street’ on Dec. 28.

Also Read: Will AT&T’s Latest Strategies Impress the Market? Analyst Weighs In On Potential Impact And New Ericsson Deal

3 Big Challenges In 2023

Per Barden, the wireless industry has faced 3 big challenges in 2023:

  1. The market was concerned about what the post-pandemic competitive climate would look like.
  2. There were rumors about Amazon jumping into the telecom industry, which did not turn out to be true.
  3. A WSJ article published around the middle of the year, discussed potential risks associated with lead cables.

All this weighed down the sector in 2023. But these risks are now behind us, and so the telecom sector is potentially better set up in 2024.

With a yield of around 7%, AT&T has 27 years of history of paying dividends.

3 Big Reasons AT&T Is A Top Pick

“The dividend is safe. AT&T is our top pick for 3 big reasons,” Barden wrote.

  1. Fundamentals: it’s been a great fundamental performer for the last two years. They’ve met or beaten all the fundamental expectations – be it in the wireless industry, in the consumer fiber industry- and have the strength to continue that in 2024.
  2. Valuations: AT&T is trading way below all the telecom peers such as Verizon Communications Inc. (NYSE:VZ), American Tower Corp (NYSE:AMT) and T-Mobile Us Inc (NASDAQ:TMUS).
  3. Positioning: Of the 90 stocks in the S&P 500 that are over $100 billion in market cap, AT&T is #90. This means it is the least-owned mega cap stock.

The stock also features amid Citi’s 9 buy-rated stocks in the Communication Services sector list, with an expected total return of 21%. Citi is bullish on telecom stocks too. Telecom valuations “look quite compelling” due to increasing EBIT margins, according to Citi.

More positive fundamentals this quarter, more appealing prices, and a reduced interest rate forecast that allays debt worries have bolstered confidence in the sector.

Now Read: Top 3 Tech And Telecom Stocks That Could Blast Off In December

Photo: Shutterstock

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