AT&T Surges 24% in 6 Months: Buy, Sell or Hold the Stock?

AT&T Inc. T has gained 23.7% over the past year compared with the Wireless National industry’s growth of 9.6%. The stock has also outperformed the Zacks Computer & Technology sector and the S&P 500 composite’s decline of 6% and 3.9%, respectively.

Price Performance

It also outperformed its peers, such as Verizon Communications Inc. VZ and T-Mobile US, Inc. TMUS. Verizon has gained 6.3% and T-Mobile has surged 7.2% over this period. TMUS continues to enhance its network infrastructure, including 5G and fiber networks, to provide best-in-class coverage and capacity nationwide. On the other hand, Verizon is benefiting from significant 5G adoption and fixed wireless broadband momentum with premium unlimited plans.  

AT&T inched down 0.1% in the last trading session and closed at $27.61. The stock is currently trading at a 5% discount to its 52-week high. Does this pullback indicate a buying opportunity? Let’s dive in to a detailed discussion and asses best course of action for your portfolio.

Major Tailwinds for T

AT&T continues to enhance its network infrastructure, including 5G and fiber networks, to provide best-in-class coverage and capacity across the nation. The infrastructure investments position it for growth by ensuring widespread access to its services. With a customer-centric business model, AT&T is riding on the increased deployment of mid-band spectrum and greater fiber densification. An integrated fiber expansion strategy is expected to improve broadband connectivity for enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience. 

AT&T witnessed solid subscriber momentum with 290,000 post-paid net additions in the first quarter of 2025. This included 324,000 postpaid wireless phone additions. Postpaid churn was 0.83%, while postpaid phone-only average revenue per user increased 1.8% year over year to $56.56 due to improved international roaming, pricing actions, and a transition to higher-priced unlimited plans.

AT&T now expects to exceed 30 million total fiber locations by mid-2025, ahead of its year-end goal. Management aims to reach more than 50 million locations by 2029 through organic builds, the Gigapower joint venture and commercial open-access partnerships. AT&T is also rapidly exiting legacy copper network operations across most of its wireline footprint as it transitions to 5G and fiber.

AT&T is benefiting from the 5G boom. Its 5G service entails the utilization of millimeter-wave spectrum for deployment in dense pockets, while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. The acquisition of mid-band spectrum (C-Band) further offers significant bandwidth with better propagation characteristics for optimum coverage in rural and urban areas. AT&T believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices. 

AT&T anticipates gaining a competitive edge over rivals through edge computing services that allow businesses to route application-specific traffic where they need it and where it’s most effective, whether in the cloud, the network, or on their premises. Through its Multi-access Edge Compute solution, the company offers the flexibility to better manage data traffic. The MEC leverages an indigenous software-defined network to enable low-latency, high-bandwidth applications for faster access to data processing. 

AT&T expects edge computing solutions to be widely available in autonomous vehicles, drones, robotic production lines and autonomous forklifts in the near future. Utilizing machine learning techniques and more connected devices, it could transform the way data-intensive images are transferred across the industry on a real-time basis. The company has extended its long-standing business relationship with Google Cloud to offer end-to-end solutions for improved customer experiences. 

The solutions are likely to facilitate diverse businesses to better harness edge connections and edge computing capabilities as increased 5G deployments give rise to a large quantum of data. AT&T has also collaborated with Microsoft to move its 5G mobile network to the latter’s cloud. The move will enable AT&T to enhance productivity and deliver large-scale network services to meet customers’ needs.

AT&T’s Strong FCF Generation and Capital Return

AT&T reaffirmed its full-year free cash flow guidance of more than $16 billion, due to cost savings. The company is also aiming to reduce its debt burden by monetizing non-core assets. In first-quarter 2025, AT&T generated $9.05 billion of cash from operations, and free cash flow was $3.15 billion. As of March 31, 2025, AT&T had $6.88 billion of cash and cash equivalents with long-term debt of $117.26 billion. Net debt to adjusted EBITDA was about 2.63X. 

This paves the way for capital returns. Management highlighted that the company will begin share repurchases in the second quarter, targeting $3 billion by year-end under a $10 billion authorization, with the rest to follow in 2026. This underscores shareholder commitment.

Several Challenges Loom Large for AT&T

Despite solid wireless traction, AT&T is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet-protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. 

High-speed Internet revenues are contracting due to the legacy Digital Subscriber Line decline, simplified pricing and bundle discounts. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate, affecting its growth potential to some extent.

Diminished visibility in the macroeconomic environment driven by evolving U.S. trade policy remains a concern. AT&T added that the tariffs could potentially increase the cost of smartphones, cost of network infrastructure, and technical equipment. Though it added that based on the 90-day pause on reciprocal tariffs and visibility into the supply chain, it expects to manage the anticipated higher costs within the 2025 financial guidance. 

Given the uncertainty, analysts have kept their estimates unchanged for the current quarter but have revised them downwards for the current and the next year. The negative estimate revision depicts bearish sentiments for the stock.

Key Valuation Metric

From a valuation standpoint, AT&T appears to be trading relatively cheaper than the industry but well above its mean. Going by the price/earnings ratio, the company shares currently trade at 12.96 forward earnings, slightly lower than 13.88 for the industry but well above the stock’s mean of 9.64.

How to Strategize Investment in AT&T?

By investing steadily in infrastructure and pioneering new technologies, AT&T is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid postpaid subscriber growth and higher average revenue per user in the Mobility Service business.

However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. AT&T carries a Zacks Rank #3 (Hold) at present, which implies investors should wait for a more favorable entry point to accumulate the stock.

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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