JP Morgan Upgrades AT&T Inc. Stock From Neutral To Overweight

On Thursday, in a research paper, AT&T Inc. stock is upgraded to Overweight from Neutral by JP Morgan. The sell side research company also updated its stock price target to $40 from previous $35, mentioning robust synergies from the latest DIRECTV deal, which is most likely to be finalized by the end of this month.

JP Morgan rationalized its model including synergies from Mexican acquisition and DirecTV, which led to better earnings viewpoint and an optimistic shift in the stock price target. The research firm also updated AT&T stock valuation on standalone basis, eliminating the effects of acquisitions. The update involves an increase in the upcoming quarter and beyond revenue from wireless services providing the company is currently slurping the vilest of its last year price cuts.

Philip Cusick, an analyst at JP Morgan Chase & Co. said, “Though our upgrade is based on a cost cutting thesis including DTV synergies, lower Opex needed to support slowing Capex, and Project Agile, which should start to create savings in 2016 that accelerate to a $1.50-2b run-rate in 2017.” He thinks that the company’s dividend of 5.4% is too big as compared to 4.5% dividend of Verizon, the 2% SPX and the 10 year bond of 2.4%. This reflects a real stock positivity as shareholders become more contented with the sustainability of dividends.

The sell side research firm believes that the old days of witnessing high business growth at DirecTV is nothing more than a past, while United States video customers ar DirecTV and AT&T are most likely to continue being stable , while total costs is likely to go down. The research firms expect the company to emphasize on video efforts on broadband and data services business, which proposed lower cost of programming.

As per the analysts poll conducted by Bloomberg, 11 out of 38 analysts rated the stock as Buy, 24 gave a Hold, while only 3 assigned Sell rating to the stock of the company. The twelve month consensus price objective is #35.17 on the stock, which is flat compared to the current stock price of AT&T.

AT&T stock was up 0.74% to $35.29 at market close on Thursday June 4^th. The firm has 52-week high and low stock price of $37.48 and $32.07, respectively. The company has $182.01 billion of market capitalization and 31.81x of price multiple.

In separate news, Philip Cusack demoted Verizon Communication shares to Neutral from Overweight, while maintaining $55 of price. He expects the firm to generate solid second quarter earnings.

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