AT&T Inc. (NYSE: T) is in the midst of a competitive storm within the telecom industry. Although things may seem tough for this major telecom at the moment, with the stock down about 3% year to date, one analyst is taking a very positive stance on the stock.

Jefferies is continuing to recommend investors own AT&T, given increased accretion from the pending Time Warner Inc. (NYSE: TWX) deal, diversification away from wireless, expectations for improving/stabilizing wireless trends, secure access to spectrum and an attractive and growing free cash flow story.

As a result, the brokerage firm reiterated its Buy rating and $48 price target (versus a $40.25 prior close). This price target implies an upside of roughly 20%.

Since the deal was announced, Time Warner estimate changes and AT&T’s higher stock price have materially improved the deal’s accretion profile. Jefferies now anticipates 2020 free cash flow per share and EPS accretion of 8.4% and 8.3%, respectively, up from low single digits prior.

Also with wireless pricing and competition raising questions about long-term industry returns, the firm favors AT&T’s more diversified strategy. The complementary nature of the Time Warner should support higher growth opportunities and potential multiple expansion, while providing additional dividend support.

What stands out here is that Jefferies believes that consolidation — potentially between Sprint and T-Mobile — could pose risks and benefits. Longer term, the firm sees the benefit of a three-player market bringing more rational pricing and promotional behavior, as well as the focus on free cash flow lifting all tides.

Overall Jefferies believes that AT&T is well positioned considering:

• Subsiding feature phone headwinds, boosting the handset outlook
• ARPU further along the stabilization curve than large peers
• Incremental DirecTV synergies benefiting Entertainment margins
• Spectrum holdings that could increase deployed spectrum capacity by up to 60%, important given data usage and the re-emergence of unlimited data plans

Shares of AT&T were trading at $40.29 Wednesday afternoon, with a consensus analyst price target of $42.95 and a 52-week trading range of $36.10 to $43.89.

Time Warner shares were last seen at $99.88, with a 52-week range of $68.97 to $99.97 and a consensus price target of $105.31.

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