AT&T Surges 46.8% in a Year: Should T Stock Be in Your Portfolio?

AT&T, Inc. T has gained 46.8% over the past year compared with the Wireless National industry’s growth of 24%. The stock has also outperformed the Zacks Computer & Technology sector and the S&P 500’s growth of 29.8% and 20.9%, respectively.

The company has outperformed its peers like Verizon Communications Inc. VZ and T-Mobile US, Inc. TMUS. Verizon has gained 7.6%, while TMUS has increased 27.3% during this period.

Key Growth Drivers of T

AT&T’s Communication segment is benefiting from healthy subscriber momentum and growth in postpaid average revenue per user. Strong demand in its fiber broadband portfolio is also driving growth in the Consumer Wireline business. The company recorded net fiber additions of 243,000, while Internet Air added 203,000 subscribers during the second quarter. AT&T has been taking several initiatives to expand its broadband business across the country. Its fiber broadband network has reached 30 million consumer and business locations in the second quarter. The company is aiming to reach 60 million fiber locations by 2030. The acquisition of Lumen's fiber connectivity business is a major step toward that direction. The One Big Beautiful Bill Act that Congress passed last month will also act as a catalyst for its fiber densification process. Per our estimate, AT&T is projected to generate $12.3 billion in revenues from the broadband business in 2025, implying 9.8% growth year over year.

The company is taking necessary steps to optimize its portfolio by divesting non-core assets. It has completed the divestiture of its 70% stake in DIRECTV. The prudent decision is enabling management to focus on the company’s primary growth engine, which is its 5G portfolio and fiber broadband services. 

The company recently deployed a third-party RAN automation application (rApp) in its live production network. The rApp, powered by Ericsson Intelligent Automation Platform, successfully performed optimization on the live network. This is a major achievement as it allows CSPs to move from problems related to vendor lock-in and create an open multi-vendor ecosystem that unlocks next-generation innovation and efficiency. 

It is also developing its satellite solutions portfolio in collaboration with AST SpaceMobile. ASTS and AT&T recently successfully completed a voice call and text with AST's Block 1 satellites with a standard cell phone utilizing AT&T’s network. This achievement laid the foundation for expanding network coverage across remote and underserved areas. These innovation initiatives are expected to boost AT&T’s commercial prospects in the long run.

Major Challenges for T

However, AT&T is facing stiff competition from other prominent players in the industry, such as Comcast, Verizon and T-Mobile. T-Mobile’s postpaid services are witnessing strong customer engagement. In the second quarter, T-Mobile added 495,000 postpaid phone net customers, while the postpaid churn rate was 0.91%. The company recently completed the acquisition of US Cellular. 

The acquisition added more than 4 million customers and strengthened T-Mobile’s position as a leading network provider in the country. Verizon is steadily expanding its fiber footprint. The acquisition of Frontier Communications will bolster Verizon’s fiber Internet business nationwide. These developments from competitors can pose a major challenge to AT&T’s growth initiatives.

AT&T is also facing in the Business Wireline vertical. Net sales are impacted by lower demand for legacy voice and data services as customers shift to more advanced IP-based offerings. Per our estimate, AT&T is expected to generate $17.91 billion in revenues from Business Wireline in 2025, indicating a 4.8% decline year over year.

Estimate Revision Trend of T

AT&T is currently witnessing a uptrend in estimate revisions. Earnings estimates for 2025 has increased 0.49% to $2.04 over the past 60 days, while the same for 2026 has remained unchanged at $2.24.

Key Valuation Metric of T

From a valuation standpoint, AT&T appears to be trading relatively cheaper compared to the industry but trading above its mean. Going by the price/earnings ratio, the company shares currently trade at 12.83 forward earnings, lower than 13.27 for the industry but above the stock’s mean of 11.32.

End Note

AT&T is benefiting from solid customer engagement in the wireless vertical. Its resilient business model and robust cash flow position are positives. The company’s effort to address service providers’ pain points through strategic collaboration with industry leaders such as Ericsson bodes well for long-term growth. 

However, intensifying competition in the highly saturated U.S. wireless market are weighing on margin. Macroeconomic challenges remain a concern. With a Zacks Rank #3 (Hold), AT&T appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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