AT&T Outpaces Industry in 6 Months: Reason to Buy the Stock?

AT&T, Inc. T has gained 26.7% over the past year compared with the Wireless National industry’s growth of 10.3%. The stock has also outperformed the Zacks Computer & Technology sector and the S&P 500’s growth of 5.9% and 4.6%, 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 8.5% during this period.

T Rides on Strong Fiber Expansion and Portfolio Strength

AT&T fiber network recently reached 30 million consumer and business locations across the United States. Per a report from Grand View Research, the U.S. fiber broadband market is expected to witness a 7.5% compound annual growth rate from the 2024-2030 period. Growing usage of high bandwidth-intensive applications, government initiatives such as the BEAD program funding to bridge the digital divide, are major drivers for this growth.

AT&T is heavily investing in fiber expansion to capitalize on this emerging market trend. The company aims to reach 60 million by 2030. In the first quarter of 2025, the company added 261,000 fiber customers. Per our estimate, the company is expected to add 1,048,000 fiber customers by the end of 2025. The acquisition of Lumen’s fiber business will significantly boost its fiber footprint with the addition of 4 million fiber locations across 11 U.S. states.

The company’s strong focus on improving services for its business customers is a tailwind. It recently introduced AT&T Turbo for Business, a premium mobile service feature that offers greater performance and consistent connectivity on AT&T’s network. A robust network experience, 24/7 priority treatment is provided without any extra software and management tools. The Business Unlimited Premium 2.0 with Turbo plan for smartphones comes with unlimited prioritized data treatment and 200 GB of hotspot data. 

Such cutting-edge features make it easier for businesses to conduct essential operations like point-of-sale transactions, high-speed financial trading, and dispatch systems. The new service is ideal for sectors that require fast data transmission, such as retail, logistics, fintech and healthcare. This is expected to boost AT&T’s commercial prospects in the B2B space.

AT&T is also steadily expanding its portfolio to gain a competitive edge. The company has introduced several enhancements in its Next Generation 9-1-1 emergency communications platform, AT&T ESInet. The new features seamlessly support picture and video messaging capabilities and also offer automatic vehicle crash alerts. Such initiatives highlight AT&T’s strategy of expanding its portfolio offerings for diverse use cases in various sectors. This augurs well for long-term growth.

Major Challenges for T

AT&T operates in the highly saturated U.S. wireless market. Intensifying competition with T-Mobile, Verizon, and Comcast is weighing on its margin. Companies like Verizon and TMUS are also expanding their portfolio to gain traction in the B2B space. In the first quarter of 2025, Verizon introduced Verizon Business Assistant to support small business owners. The generative AI-powered solution comes with enticing features that streamline customer interactions. T-Mobile is also expanding its wireless offering for small and medium businesses. Its newer plans, like Business Unlimited Edge, Ultimate, and Advanced, are gaining popularity. This can intensify competition for AT&T in the B2B domain.

AT&T is facing a steady decline in linear TV subscribers and legacy services. Continued cord-cutting remains a perennial challenge as consumers increasingly cancel pay TV packages for cheaper streaming options from Netflix, Amazon, Hulu and other services. The company’s effort to attract customers with healthy discounts, freebies and cash credits is putting pressure on the margin.

Estimate Revision Trend of T

Earnings estimates 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 at a premium compared to the industry and trading above its mean. Going by the price/earnings ratio, the company shares currently trade at 13.55 forward earnings, higher than 13.36 for the industry and above the stock’s mean of 10.63.

End Note

AT&T has undertaken an aggressive fiber expansion strategy with a multidimensional approach that includes enhancing its regional fiber network, strategic buyouts, public-private partnerships and more. This is expected to drive fiber customer growth in the upcoming quarters. The effort to venture into new markets by advancing its portfolio offerings is positive. A customer-focused approach will likely bring long-term benefits.

However, intensifying competition in the U.S. wireless industry is hindering growth. Weakness in the wireline business due to lower demand for legacy voice and data services is 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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