Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high

AT&T (T). The merger with BellSouth (BLS) is done. Now for the hard part. Last year, AT&T’s stock rose over 35%. AT&T has one things going for it. Cingular. The huge cell phone outfit is the countries largest wireless provider.

But, AT&T depends on its fixed line business for the largest portion of its revenue. That business is under seige by every cable firm in the US, Vonage, Skype and any other VoIP provider that investors can shake a stick at.

AT&T is hoping to improve revenue through new channels like advertising that will run on its cellphones and TVs using its internet connections. But, as The Wall Street Journal has pointed out, AT&T has almost no experience in the new business.

Barron’s recently pointed out that AT&T’s share price should fall this year. And, the reasons are sound. The company’s attempt to deliver high speed broadband through a combination of cooper and fiber have run into problems. Moving to fiber alone could cost billions of dollars.  AT&T and Verizon are both hoping that their new, faster connections to the home will allow them to take TV from cable companies. But, AT&T is very late to the game. Companies like Comcast and Time Warner Cable already deliver voice, broadband, and TV, and they are signing up millions of VoIP customers which takes a bite out of AT&T’s core business.

Factors that could move the stock higher than forecast: AT&T may surprise Wall St. by getting more savings than expected out of its BellSouth integration. If its TV-to-the-home products begin to add new subscribers quickly, a lot of doubt about the huge initiative could go away.

Factors that could move the stock below forecast: The biggest challenge to AT&T is VoIP. If large cable companies can accelerate taking business from AT&T and Verizon. the phone companies may have to cut prices to keep business.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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