AT&T: Don’t Get FOMO at Peak Valuation

As AT&T (T) trades at $27.15 in early April 2025—the highest price in its history—investors might be tempted to jump in. But before buying into the hype, it’s worth scrutinizing whether this telecom giant is now overvalued, even after years of strategic pivots and financial discipline.

Let’s start with the math.

Valuation Metrics: A Mixed Picture

AT&T’s valuation multiples suggest it’s no longer a bargain, even if it’s performing well.

EV/EBITDA: Slightly Overpriced Relative to Peers
The company’s enterprise value (EV) is $348.98 billion, with trailing-12-month (TTM) EBITDA of $44.04 billion. This gives an EV/EBITDA of 7.92, marginally above the Telecommunication Services industry median of 7.495. Historically, AT&T’s EV/EBITDA has swung between 5.39 and 15.2 over the past 13 years, so today’s multiple sits near the upper third of its range.

P/E Ratio: Elevated but Justified?
The P/E ratio of 18.22 is elevated for a slow-growth telecom. This reflects strong TTM earnings of $1.49 per share, but the market is pricing in optimism about AT&T’s streaming assets (e.g., HBO Max) and fiber expansion.

Price-to-Book Ratio: Approaching Fair Value
AT&T’s P/B ratio has risen sharply, hitting 1.62 as of April 2025. This is up from 1.33 in mid-2024 and 1.18 over the past decade. While still below the industry median of 1.685, the trend suggests investors are increasingly valuing the company above its book value—a sign of confidence in its intangible assets (like content libraries) and growth initiatives.

The Bull Case: Solid Fundamentals

AT&T’s recent results are undeniable. In 2024, it delivered $17.6 billion in free cash flow, above guidance, with TTM adjusted EBITDA up 2.2%. Postpaid phone net additions hit 1.7 million, and fiber broadband subscriptions grew steadily. Management’s 2025 outlook—$1.97–$2.07 EPS—hints at further margin expansion.

The company’s focus on high-margin segments like wireless and fiber, along with its streaming pivot, has reduced reliance on commoditized landlines. Meanwhile, its Mexico operations and DirecTV stake provide geographic diversification.

The Bear Case: Valuation Ceiling and Risks

Even with strong execution, the current price may be too rich for comfort.

1. Historical Multiples: Overvalued by Some Measures
   AT&T’s EV/EBITDA of 7.92 is higher than its 13-year median of 6.57, suggesting investors are paying more for each dollar of EBITDA than they have historically.

2. Book Value Growth: A Cautionary Tale
   While the P/B ratio has risen, AT&T’s book value per share has struggled over the long term. Over five years, it’s declined 12.4% annually, reflecting challenges in asset appreciation. This weakens the case for valuing the company purely on balance sheet metrics.

3. Industry Competition: The T-Mobile Threat
   T-Mobile (TMUS) has consistently outperformed AT&T in growth areas like 5G adoption and customer acquisition. Its market cap of $306 billion dwarfs AT&T’s $192 billion, signaling investor preference for disruptors over incumbents.

4. Debt Overhang
   AT&T’s net debt remains hefty at $166 billion, limiting its flexibility to weather a slowdown or fund aggressive investments.

The Bottom Line: Is Now the Time?

AT&T’s stock has surged 44% since its 2023 low of $14.12, but the question remains: Is the rally sustainable?

The P/B ratio is a key litmus test. Historically, AT&T’s stock has underperformed when its P/B exceeds 1.5, as investors grow skeptical of overvaluation. Today’s 1.62 is nearing that threshold, especially with the industry median in sight.

Meanwhile, the EV/EBITDA multiple is already pricing in near-perfect execution. If AT&T misses its 2025 EPS target of $2.07, or faces regulatory headwinds (e.g., scrutiny of its content empire), the stock could correct sharply.

Final Take: Proceed with Caution

AT&T is a solid company with a reliable dividend and improving fundamentals. But at $27.15, it’s trading at a valuation that leaves little margin for error. Investors chasing FOMO—hoping to ride the stock to even loftier heights—might be better served by waiting for a pullback or focusing on faster-growing peers like T-Mobile.

The numbers don’t lie: AT&T’s stock is at a new high, but its valuation multiples are too stretched to justify a "buy" rating here.