AT&T Targeted for 13% Gain by American Bank

American Bank has reinstated its "buy" rating for AT&T (T.US), highlighting the company's balanced approach to growth and returns. The bank has set a target price of $32 for the stock, indicating a potential 13% increase from its closing price of $28.29 on July 8.

The bank's assessment underscores AT&T's strategic focus on accelerating growth through its wireless and fiber assets. This strategy aims to enhance profitability and free cash flow (FCF) by improving efficiency in both wireless and wired networks. Additionally, AT&T has pledged a substantial capital return program, targeting $400 billion.

American Bank projects that AT&T will benefit significantly from the reintroduction of the "immediate depreciation" policy. This policy is expected to boost the company's free cash flow by 21% in 2026 and 26% in 2027. Based on the 2026 estimated enterprise value multiple (EV/EBITDA), AT&T is currently trading at a 30% discount to T-Mobile US and a 9% premium to Verizon. Considering AT&T's current business momentum, strong wireless and fiber asset portfolio, and its targeted capital return plan for the coming years, American Bank believes that AT&T's valuation should be closer to that of T-Mobile US rather than Verizon.

The bank emphasizes that fiber optics is a core component of AT&T's long-term strategy. During an analyst day, the company's management revealed plans to achieve fiber coverage for over 50 million households and businesses by 2029, with 45 million of these being self-owned and operated, and over 5 million through partnerships. Following the acquisition of Lumen's consumer fiber business in May 2025, this target was raised to over 60 million by 2030. American Bank believes that AT&T's industry-leading fiber network, combined with its robust wireless business, will maintain strong competitiveness in an increasingly competitive market.

Furthermore, American Bank notes that AT&T's continued execution of its "Effective Connectivity" strategy is reducing the company's leverage and paving the way for increased shareholder returns. With a visible 2.5x leverage target, AT&T initiated a stock buyback program in the second quarter of 2025 and plans to repurchase a total of $200 billion in stock by the end of 2027.

The bank's $32 target price for AT&T is based on a 13x valuation multiple of the company's estimated free cash flow for 2026. American Bank considers this valuation multiple to be reasonable, given AT&T's growing free cash flow, stock buyback program, and attractive dividend yield.