Two Takes, One Odd Outcome Predicted for AT&T in 2014

Telecom & Wireless

Published: December 6, 2013 11:00 am

Last Updated: December 6, 2013 11:01 am

AT&T Inc. (NYSE: T) is finding itself in a strange spot going into 2014. It is the highest of the yields in the Dow Jones Industrial Average by far, and that makes it the clear top dog for the 2014 Dogs of the Dow. Now we have two differing analyst opinions that oddly enough come to the same conclusion for the stock in 2014 yet with entirely different biases.

What are investors supposed to think when they see one analyst stay very positive and one analyst downgrade a stock, only to see that the price target remains the same? That is Wall Street for you.

On Friday, Credit Suisse issued a positive report. The firm maintained its Outperform rating, after meeting with management, with a $38 price target. Pay attention to that target price. Credit Suisse sees benefits from its project VIP investments and believes that a change to its wireless pricing plans should appeal to a larger base of consumers. Credit Suisse believes that the plan offers an attractive price point to bring in new subscribers, even if there may be some revenue per user pressure from the move.

The counter take this week was that AT&T was downgraded to Neutral from Overweight by J.P. Morgan on Wednesday. Its price target was the same $38 for the year ahead. Shares had closed at $34.74 on the prior day. We did note that even with the downgrade the $38 price target was above the $37.08 consensus from Thomson Reuters.

AT&T has been lackluster in 2013 with a total return of right at 7%, even after you include that dividend yield of more than 5%. In short, investors effectively have been paid to wait here. The dual $38 price targets will generate a return of 11%, plus the yield, if the target is hit. If $38 sounds too high, just remember that the 52-week trading range is $32.76 to $39.00.

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