Analysts listed their reasons for preferring AT&T Inc (NYSE:T) over Verizon Communications Inc (NYSE:VZ) post Q1.
Barclays saw industry headwinds common across the major operators like Verizon and AT&T. However, Verizon may be more exposed to these than its peers. Barclays saw that many investors would continue to favor AT&T over Verizon.
Also Read: AT&T Smashes Q1 Performance Backed By Robust Postpaid Phone, Fiber Broadband Net Adds, Verizon Shares Drop After Q1 Earnings, Weaker Than Expected Outlook
RBC Capital analyst Kutgun Maral maintained AT&T with a Sector Perform and lowered the price target from $30 to $20. Mural is cheerful about the company continuing to deliver "strong" subscriber gains across wireless with its seventh consecutive quarter of over 600K postpaid phone net adds and fiber.
The management builds credibility with its sharpened connectivity-centric strategy. Still, he prefers to see "proof points" in the strategy against "increasingly competitive" markets and line of sight into the end of the ongoing investment cycle.
Wells Fargo analyst Eric Luebchow had an Equal Weight rating on AT&T and a $21 price target.
Luebchow saw the strength and execution in its core wireless business offset some secular challenges in other business segments (i.e., legacy wireline).
With the WarnerMedia spin/split looming, pro forma AT&T should be a healthier company with the opportunity to grow at a low- to mid-single-digit rate organically.
Luebchow saw Verizon continue to be a market leader with the transition to 5G based on its industry-leading 4G network. Still, ultimately its lack of mid-band 5G spectrum will be a headwind until it can build out its C-band network, which led to an Equal Weight with a price target of $58.
Raymond James analyst Frank Louthan reiterated Outperform on Verizon following 1Q results, following the 1Q22 print and the disappointing guide.
The longer-term fundamentals of Verizon remain in good shape, with consistent results and predictable, recurring revenue, which will quickly reflect in the shares. The primarily domestic, stable recurring revenue at Verizon should make it a safe haven for investors over the next 12 months, and with a ~5% yield, VZ remains attractive.
Goldman Sachs analyst Brett Feldman downgraded Verizon from Buy to Neutral. As AT&T shows improved execution and financial performance over the coming quarters, the stock's "valuation gap" with Verizon will compress, driving outperformance in AT&T.
Feldman thinks Verizon is well-positioned to maintain its leading market share in the wireless sector during the 5G cycle. However, his mid-to-long-term estimates remain below the company's guidance.
Feldman sees Verizon offering the limited potential for outperformance over the next 12 months. He recommends AT&T shares as having more upside and reinstated AT&T with a Buy and a $23 price target.
AT&T's communications-focused business model and adjusted capital allocation priorities following its recently completed asset sales and spin-off of WarnerMedia better position the company to invest in fiber and 5 G's core growth opportunities and "sustain more durable trends" in revenues and adjusted earnings.
Price Action: VZ shares traded lower by 4.14% at $49.76 on the last check Monday. T shares traded lower by 0.09% at $19.50.
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