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AT&T Inc.’s stock may conjure up the sense of “apathy” or “negative muscle memory,” but Wall Street’s latest bull says it’s time for investors to take the stock more seriously.

“Fundamentally, AT&T is on course,” Wolfe Research’s Peter Supino wrote in a Tuesday note to clients as he lifted his rating on AT&T shares
T,
+1.93%
to outperform from peer perform. He has a $21 target price on the stock.

Shares were up about 1% in premarket trading Tuesday.

Supino said AT&T is improving in a number of areas, including churn, or the portion of subscribers who leave its service. AT&T’s churn is now at “peer levels” and while it could tick higher in the first quarter due to pricing moves and a recent “embarrassing” network outage, Supino thinks trends will normalize afterward, resulting in about flat postpaid phone churn for the full year.

He further noted that while year-over-year gross additions deteriorated for five quarters due to heightened competitive activity from cable providers, that pressure could ease this year. Charter Communications Inc.’s Spectrum One offering has been around for more than a year, and its Spectrum Mobile phone service “has begun to decelerate.”

Supino flagged AT&T’s “focus on pursuing/attracting consumers at the value end of the consumer spectrum,” such as those with one or two lines, “who have been gravitating to the cable offerings.”

Back in 2022, AT&T’s management disappointed Wall Street with its messaging on free cash flow, but Supino thinks the company “has since taken the necessary steps to de-risk such surprises including its component (major changes, quarterly cadence) commentary and public disclosures.”

Additionally, while AT&T expects $17 billion to $18 billion in free cash flow this year, Supino says the metric “arguably skews to the upper-end” of that guidance.

“Amidst bad headlines about convergence, interest rates, and lead, AT&T is growing its core, gaining efficiency and paying down debt,” Supino said. Meanwhile, the company’s free-cash-flow yield upwards of 12% and its 6.6% dividend yield “skew the risk/reward very positively.”

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