AT&T a buy, says Valuecruncher
Posted
Aug 06 2008, 12:37 PM
by
Kim Peterson
Rating:
Shares of AT&T are trading at $30.50, near the bottom of the 12-month range. The stock should be valued at $39.25, says stock blog Valuecruncher, which recommends a buy. I don't agree. AT&T's traditional voice business is hurting too much right now.
Valuecruncher places a lot of, er, stock in analyst recommendations, saying that most of the analysts on Yahoo Finance (and on MSN Money) rate the stock a buy or strong buy. And analysts have a mean target price of $41.31 on AT&T.
Also, the stock is trading at about 13.4 times earnings, which is at the lower end of the five-year range. And AT&T is the exclusive carrier for Apple's new iPhone, which is selling out everywhere.
On the downside, says Valuecruncher, is the $300 subsidy AT&T pays for every iPhone. And the declining revenue from traditional landline phones as people drop those and go with cell phones.
The landline slippage was enough for JP Morgan to recently downgrade the stock to neutral. The company's second quarter results "reflect the strong effect the economy
and competition are having on AT&T's wireline business," wrote analysts, "as
demonstrated by rapidly rising access line losses and relatively anemic
broadband subscriber adds."
AT&T still gets about a third of its revenue from landline phones. In its earnings report last month, the company said its landline count dropped 2.6% in three months to 58.9 million -- a surprisingly fast decline.
