AT&T shares closed at $22.50, up 12.15% after news that it’s stoc...
AT&T shares closed at $22.50, up 12.15% after news that it’s stock was upgraded to strong buy by Morgan Stanley from neutral in report issued Tues. Morgan Stanley, saying it saw better times ahead for AT&T, established 12-month target…
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price of $35 for company, saying stock now was worth $35-$40 per share after falling 66% in 2000, with AT&T Wireless continuing to show strong growth. AT&T cable prospects also were seen as positive. Morgan Stanley remained cautious on long distance business, figuring valuation at zero at current stock price despite generating estimated $15 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) this year, citing company’s debt load of $60 billion. Brokerage said break-up of company would act as performance catalyst over next several months. It also said plan to distribute rest of AT&T Wireless to shareholders plus aggressive asset disposal program should prove beneficial. While acknowledging AT&T’s “challenging” credit position, Morgan Stanley identified its steps to improve situation such as raising nearly $10 billion from NTT DoCoMo, completing $25 billion debt facility, cutting dividend 83%. It said outlook for 4th quarter foresaw AT&T Wireless “looking good,” adding 850,000 subscribers and generating $2.596 billion in revenue, up 38.2% from a year ago. Beyond 4th quarter, broadband IPO outlook still was seen as problem, with regulatory hurdles to overcome and improvement needed in operating and financial metrics. Cable revenue was expected to grow 9-9.5% on pro forma basis in quarter and 10.5-11% in year, including Comcast swap. By end of year, Morgan Stanley said it expected AT&T Broadband digital penetration of 18.5%, largest digital footprint in U.S., with 1.15 million high-speed data subscribers, 550,000-570,000 residential telephony customers and almost 10% penetration, with revenue of $70 million anticipated. AT&T Broadband capital expenditure this year is expected to be robust. AT&T is to release 4th quarter earnings in week of Jan. 29.