Is AT&T's Selloff a Strategic Buying Opportunity Amid Accelerating Convergence Growth?

The recent selloff in AT&T (T) has sparked debate among investors about whether the stock's depressed valuation reflects a compelling entry point. With the company trading at a 27% discount to the Communication Services sector average P/E ratio of 22.51 and a 18% discount to its 10-year P/E average of 20.21, the case for undervaluation appears strong. However, the broader question remains: Can AT&T's long-term EBITDA expansion potential justify a strategic investment at current levels?

Valuation Metrics: A Discounted Peer in a Competitive Landscape

As of September 2025, AT&T's price-to-earnings (P/E) ratio of 16.5 is significantly lower than its historical averages and sector benchmarks, according to a KeyBanc report. This discount is even more pronounced when examining its enterprise value-to-EBITDA (EV/EBITDA) ratio. The company trades at approximately 6.2 times KeyBanc Capital Markets' 2026 adjusted EBITDA estimate, below its 10-year average of 7x, per the same KeyBanc report. This valuation gap suggests that the market may be underappreciating AT&T's improving fundamentals.

Comparisons with peers further highlight its attractiveness. T-Mobile (TMUS), for instance, trades at an EV/EBITDA of 7.64 as of October 2025, according to ValueInvesting.io, while Verizon's leverage ratios and EBITDA growth guidance (2.5–3.5% for 2025) indicate a more conservative but less aggressive valuation profile, as detailed in a Verizon earnings release. AT&T's current EV/EBITDA of 6.2x is not only below its historical average but also positions it as one of the most affordable large-cap telecom stocks in the sector.

EBITDA Growth: A Catalyst for Re-rating

The key to unlocking AT&T's valuation lies in its EBITDA trajectory. KeyBanc analysts project that adjusted EBITDA growth will accelerate from approximately 3% in 2025 to nearly 5% by 2027–2028, per the KeyBanc report. This improvement is driven by cost discipline, spectrum efficiency gains, and the rollout of 5G services in the U.S. and Latin America. Such growth could justify a re-rating to the 7x EBITDA multiple KeyBanc anticipates by 2026, supporting a $30 price target-a 19% upside from current levels, according to the KeyBanc report.

Verizon's pending $20 billion acquisition of Frontier Communications adds another layer of complexity. While this deal could temporarily distort valuation comparisons, it also underscores the sector's focus on scale and infrastructure. AT&T's disciplined capital return strategy-returning $15 billion to shareholders in 2025-further strengthens its appeal, as it balances reinvestment with shareholder value, according to the KeyBanc report.

Risks and Considerations

Despite these positives, risks persist. AT&T's net unsecured debt-to-EBITDA ratio of 2.2x (as of Q3 2025) is comparable to Verizon's, but its EBITDA growth must outpace peers to justify a multiple expansion, as highlighted in the Verizon earnings release. Additionally, regulatory scrutiny of telecom consolidation and competitive pressures from T-Mobile's aggressive 5G rollout could temper optimism.

Conclusion: A Strategic Buy for Patient Investors

AT&T's valuation metrics and EBITDA growth trajectory present a compelling case for a strategic buy. The stock's current discount to both historical averages and peers, combined with a clear path to earnings expansion, suggests that the market is underestimating its long-term potential. While risks like debt and competition remain, the convergence of 5G adoption, cost discipline, and capital returns positions AT&T as a high-conviction opportunity for investors with a multi-year horizon.