T Shares Rise 20% in the Past Year: Should You Invest Now?

AT&T, Inc. T has gained 20% over the past year compared with the Wireless National industry’s growth of 4%. The stock has underperformed the Zacks Computer & Technology sector but outperformed the S&P 500 during this period.

The company has also outperformed its peers like Verizon Communications Inc. VZ and Comcast Corporation CMCSA. Verizon has declined 7.9%, while Comcast has decreased 29.5% during this period.

T Rides on Investment in Network Infrastructure and AI Focus

Small and mid-sized businesses are one of the major components of the American economy. Over the years, AT&T has steadily invested in its network infrastructure and tailored its network services to target this market segment. AT&T has recognized that complexity in the network is one of the key barriers to the digital transformation of these businesses. The telecom company has been focusing on eliminating frictions and complexities in network upgradation. It provides robust connectivity with the AT&T converged network, reducing dependency on IT support with built-in security systems and also converting data into insights to help businesses make better decisions. 

The company has invested $145 billion in wireline and wireless networks between the 2020-2024 period, which has a transformative effect on the backbone sector of the American economy, such as transportation, logistics, construction and others.

It is also actively deploying AI and machine learning capabilities to optimize network services. The company has deployed AT&T Geo Modeler nationwide. It is a generating AI system that predicts and optimizes network coverage in accordance with a dynamic environment. This is particularly useful during natural disasters and storms when some cell towers are down, as it automatically reconfigures network systems to enhance overall performance. Such initiatives augur well for long-term growth.

AT&T added 243,000 fiber customers during the second quarter and firmly remains on track to pass more than 50 million fiber locations by the end of 2030 with stepped-up investment, courtesy of the pro-investment provisions of the One Big Beautiful Bill Act.

Key Challenges for T

The company’s wireline division is struggling with persistent losses in access lines due to competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by cable companies.

In a saturated wireless market, spectrum crunch has become a major issue in the U.S. telecom industry. Most of the carriers are finding it increasingly difficult to manage mobile data traffic, which is growing by leaps and bounds.

The company is also affected by intense competition from other industry leaders such as Verizon, Comcast and T-Mobile. Comcast is placing strong emphasis on value, reliability and improved experience to drive user engagement in its Xfinity Internet offerings. Its comprehensive fiber network infrastructure can pose a challenge to AT&T’s fiber expansion initiative. Verizon is also expanding its fiber footprint nationwide.

Estimate Revision Trend of T

Earnings estimates for AT&T for 2025 and 2026 have remained unchanged over the past 60 days.

Key Valuation Metric of T

From a valuation standpoint, AT&T appears to be trading relatively cheaper compared to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 11.72 forward earnings, lower than 12.5 for the industry.

End Note

AT&T is benefiting from healthy momentum in its postpaid business. Strong focus on AI integration to optimize network offerings and boost customer experience is a positive. An integrated fiber expansion strategy is expected to improve the broadband connectivity for both enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience.

However, stiff competition in the saturated U.S. wireless market continues to impact margin. Weakness in the wireline business remains a major concern. High debt burden may impact investment in growth initiatives. 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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