Most analysts tracked by Alacra Pulse don’t seem to be too concerned about the potential impact that the expected loss of iPhone exclusivity will have on AT&T (T). The company has been expanding its smartphone and tablet product lines, and with wireless data rapidly growing, some analysts have increased their 12-month price targets since the second largest US mobile provider announced solid earnings [see call transcript].
The median price based on the the thirteen most recent targets tracked by Alacra Pulse is $31, slightly up from $30 a month ago and very close to Wednesday’s closing price of $29.05. The mean target is $31.08. Of these 13 analysts, 7 have a positive rating and 6 are neutral. None are negative.
Current 12-month price targets of selected sell-side and independent analysts. Click image to enlarge.
Credit Suisse analyst Jonathan Chaplin, who until recently had one of the lowest targets on AT&T, upgraded his rating to Buy from Neutral and raised his price target to $35 from $27. “Based on the results of our proprietary smart-phone survey, the impact from the loss of iPhone exclusivity should be substantially less than current valuations imply,” he wrote.
Deutsche Bank analyst Brett Feldman boosted his price target on shares of AT&T to $33 from $31 and reiterated his Buy rating, saying that the company is generating solid core earnings growth.
FBR Capital analyst David Dixon reiterated an Outperform/Top Pick rating on the mobile phone carrier with a price target of $34. ”AT&T delivered in-line results, but underlying earnings power remains strong, underpinning our Top Pick thesis…Wireless momentum remains robust, which we expect to continue in 2011 and beyond.”
AT&T’s sales of Apple’s (AAPL) iPhone could decline by 30% or more when Verizon (VZ) joins the game, according to Piper Jaffray analyst Christopher Larsen, who nevertheless has a Buy rating and $34 price target. According to a forecast by Davenport & Co’s Drake Johnstone, as many as 6 million of AT&T’s iPhone subscribers could defect to Verizon. Johnstone has a Neutral rating on the company, with no price target.
Oppenheimer analyst Tim Horan, who has kept his price target at $32, said that the firm has been winning wireless market share, and its “wireless data growth is continuing at a robust pace.” However, Horan does expect competition to intensify when Verizon starts to sell the iPhone next year.
“AT&T clearly has tried to diversify themselves away from the iPhone, and that’s probably the right strategy since they’ve relied so heavily on the iPhone these past few years,” said Chris King, an Stifel Nicolaus & Co. analyst. “This handset strategy could shelter them from some customer losses.”
UBS analyst John C. Hodulik, who has a $31 price target and Buy rating, said during AT&T’s quarterly release: ”Management will be aggressive with the iPhone in 4Q but still expects sequential margin growth, suggesting activations will come down.”
Investors have also been closely watching AT&T’s plan for a share buyback, and Bank of America Merrill Lynch analyst David Barden said that the carrier will likely announce a 2-year shares buyback plan at roughly 7 percent at or before the company’s December board meeting. Barden has a $30 price target and Neutral rating for AT&T.
Fierce Wireless notes that AT&T added more than twice as many net new connections as Verizon Wireless did during the latest quarter, bringing its total customer base to 92.8 million connections, gaining on Verizon’s 101.1 million connections. The gap between the two has been narrowing since Verizon slipped past AT&T as the nation’s largest wireless carrier via Verizon’s acquisition of Alltel.
AT&T has been “really successful” in locking its customers into two-year contracts, according to Steve Clement at Pacific Crest Securities. While Clement is not sure about “mass defections” from AT&T, he does see AT&T losing its share of new customers if and when Verizon starts selling the iPhone.
Avi Greengart at Current Analysis typifies the view of those who think most wireless customers are quite “sticky.” “IF Verizon gets an iPhone in January, it will sell a lot of them, mostly to existing Verizon customers. AT&T will lose some of its most disgruntled iPhone users, but churn overall will settle down after an initial spike, and most AT&T iPhone users will stick with AT&T.”
(Source: American Banking News, StreetInsider, Marketwatch, Investors Business Daily, Bloomberg BusinessWeek, SmarTrend, FierceWireless, CNN Money, PCMag, San Diego Busines Journal.)