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AT&T Is Worth Between $65 And $117 Right Now

Dec. 04, 2018 9:05 AM ETAT&T Inc. (T)339 Comments
John Rhodes profile picture
John Rhodes


  • Two Warren Buffett style valuation methods are applied to AT&T.
  • Method #1 indicates a value of around $117 per share.
  • Method #2 indicates a value range of $65 to $111 per share.
  • Given these calculations, AT&T is on sale for 50-70% off.
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It's been a while since I've written an article about AT&T (NYSE:T). Today, I'm going to look at two ways Warren Buffett might value the company. Then, I'm going to give you tell what this means for investors.

Back in 1998, the American Association of Individual Investors ran an article about investing like Warren Buffett. It was loaded with the usual stuff. For example, when you invest in a stock, you're investing in a business. Also, that Buffett likes consumer monopolies with a strong upward trend in earnings, conservative financing, high return on shareholders' equity, and the like.

Obviously, AT&T isn't a wonderful fit. I doubt we'll hear that Buffett has suddenly jumped on the "T" train.

There's not much need to look at the exact details here. I'm not trying to say that Buffett would buy AT&T or that there's a fit. Instead, I'm using crayons to create a simple cave painting, so we can move into valuation. Let's carry on.

Valuation Method #1

We're going to take AT&T's EPS and divide that by the long-term U.S. government bond rate.

Let's say we're working with $3.50 for the EPS. That should rise to $3.55 or even $3.60 in the next year and might even reach $3.70 or $3.75 by 2020. But, to be a bit more conservative, we'll use $3.50 for our EPS.

And, for the long-term U.S. government bond rate, let's use the 10-year rate, which lands right at about 3%. The 30-year rate is about 3.3%.

Now, the simple math is $3.50 divided by 3% (i.e., 0.03) giving us:

  • $116.67

And, if we run the math with the 30-year

This article was written by

John Rhodes profile picture
I am an investor, entrepreneur, father, husband, coach and teacher.

Analyst’s Disclosure: I am/we are long T. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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