Bank of America restarts to cover the three major telecom operators AT&T (T.US) with a “buy” rating leading the Big Three

The Zhitong Finance App learned that on Monday EST, Wall Street Bank of America relaunched in-depth coverage of the stock ratings and target stock prices of the three major US telecom giants — AT&T (T.US), Verizon (VZ.US), and T-Mobile US (TMUS.US).

Bank of America analyst Michael Fink pointed out in the research report that the telecom sector is often viewed as homogenized, institutional investors have not held enough shares for a long time, and is also overlooked by the market as a “dull and mature” industry. However, in his view, the three major US telecom operators each have unique advantages over other sectors in terms of business strategy, mergers and acquisitions, performance indicator priorities, return on capital, share repurchases and dividend rates, and expected profit risk/upward.

Bank of America also said that the three major telecom operators and the unprecedented AI boom continue to increase, and they all regard AI as a catalyst for business traffic and enterprise solutions. In particular, AT&T is expected to stand out from the top three operators, giving the company the only “buy” rating among the three.

The businesses of the three major telecom operators, AT&T, T-Mobile US, and Verizon, overlap with each other but have their own differentiated strategies or key tracks. AT&T focuses on the “wireless+fiber dual engine”, where optical fiber collaborates with 5G (fiber to tower/backhaul), making it have a larger backbone bandwidth in the AI data boom era. ; Verizon focuses on “Premium Network” + private 5G, with the C-Band/millimeter wave layout being the most active, emphasizing network quality; T-Mobile US focuses on “user growth + network efficiency” and achieves advantages across the low/medium frequency spectrum through a combination of 600 MHz + 2.5 GHz. Verizon and T-Mobile US can be described as ideal channels for consumer-grade AI streaming content (AR+AI games, etc.).

Bank of America restored AT&T's rating to “buy,” and the target price was $32. AT&T shares closed at $28.410 as of Monday's US stock close.

Bank of America analyst Fink said that AT&T achieved performance growth through a balanced strategy. With business operating momentum, a strong combination of wireless and fiber assets, and targeted capital return plans for the next few years, AT&T's valuation is expected to be closer to or surpass TMUS than VZ.

“The fiber business is key to AT&T's long-term growth strategy. We believe its industry-leading portfolio of fiber coverage and wireless business assets gives the company an edge in an increasingly competitive environment.” Analyst Fink said.

Bank of America restored Verizon's “neutral” rating, with a target price of $45. By the close of the US stock market on Monday, Verizon's stock price closed at $42.800.

Bank of America notes that Verizon has a balanced combination of a very high-quality wireless user base, return on capital, and fiber business strategy. Its wired MVNO business is a financial hedge against wireless competition from cable operators. However, in the short term, Bank of America pointed out that Verizon will still face competitive pressure, which may significantly increase promotional expenses and squeeze the company's profit margins.

“Verizon's focus on network quality, reinforces wireless value through the addition of Perks, and is cautious in promotional activities, which will resonate with investors in the medium to long term. However, as cable operators increase investment in competitive products, and competitors such as TMUS may follow the guidelines for defending net new users, we believe there is a risk of net increase in post-paid users in the short term.” Bank of America analyst Fink said.

Bank of America reinstated a “neutral” rating for T-Mobile US with a target price of $255. As of the US stock close on Monday, T-Mobile US shares closed at $237.630.

Bank of America believes that T-Mobile has strong execution at the management level and is still leading the telecommunications industry in terms of user growth, but its profit growth model is highly dependent on user growth, so it is more vulnerable to increased competition in the context of the maturity of the industry and the more aggressive entry of cable operators into the wireless market.

“T-Mobile is leading the industry in terms of net increase share of postpaid phones, sales, EBITDA growth rate, and free cash flow expansion. “However, given the company's all-time high performance guide of promising a net post-pay increase of 55-6 million, and this indicator is critical to investors, we think T-Mobile is likely to follow cable operators in adopting more competitive pricing and bundled promotion strategies at lower prices.” Bank of America analyst Fink said.