Credit Suisse described Verizon’s comfortable position:
- The company continued to indicate that it does not need Dish’s spectrum.
- Management remains confident that it is better or more efficient to build capacity by adding cell sites than paying exorbitant prices for spectrum. Adding capacity through technology could be 25% cheaper than some of the prices paid in the AWS-3 auction.
- The company could have a unique content offering, using nontraditional content that is appealing to millennials. Much of this content could come at no cost to the subscriber, potentially supported by an ad-based model.
- The wireless competitive environment has seemed to settle down somewhat.
- The use of unlicensed spectrum will help offload capacity demand. Early testing has had positive results.
Shares of Verizon were up 0.5% at $47.83 Monday afternoon, in a 52-week trading range of $45.09 to $53.66. The stock has a consensus analyst price target of $51.92. Shares of Verizon are up 5.3% year to date.
AT&T is set to share its latest quarterly earnings on Thursday. The consensus estimates call for $0.63 in EPS and $33.04 billion in revenue. In the same period of the previous year, it posted $0.62 in EPS on revenue of $32.58 billion.
Until very recently, this company was considered down and out. There was just no catalyst at all. Now the company is nearer to closing in on its DirecTV (NASDAQ: DTV) acquisition. Suddenly, analysts see massive upside for AT&T, compared to its views in the gutter just a few months ago. Investors are paying attention. AT&T provides the highest dividend yield among the mega-caps at 5.39%. With the close of the DirecTV acquisition, the dividend payout will improve to 70% (from 96% as a standalone figure last year), providing a much more comfortable level for sustainable dividend growth going forward, as the company will have a much safer margin for coverage.
Still, what stands out is that AT&T has been upgraded or given positive research reports left and right. When we ran our own bull and bear analysis on AT&T at the start of the year, the consensus price target was listed as $34.90 at that time and the highest analyst target was $40.00. Currently the stock has a consensus analyst price target of $36.74, with its highest price target from analysts at $42.
Credit Suisse continues to believe AT&T has catalysts that could drive appreciation in 2015. The catalysts at AT&T involve its transaction with DirecTV and increased guidance for synergies. In addition to this, the future for Mexico looks bright but may take some time to ramp up. AT&T was rated Outperform with a price target of $38 at Credit Suisse.
Bank of America Merrill Lynch raised its rating to Buy from Neutral late in June as well. The firm raised its price objective to $40 from $35 in its call. Merrill Lynch thinks AT&T will generate improved financial performance via a relatively more stable wireless competitive climate and from benefits in its DirecTV buyout that are higher than what the company has officially targeted.
Oppenheimer reiterated an Outperform rating and raised its price target to $40 from $36. For 2016, the firm raised its revenue and synergies forecast for the AT&T/DirecTV pro forma and raised its EPS by four cents to $2.59.
AT&T shares were down 0.5%, at $34.83 on a 52-week trading range of $32.07 to $37.48. So far on the year, shares were up 8.7%.