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AT&T, Inc. Message Board

  • wareham2620 wareham2620 Aug 1, 2008 11:39 AM Flag

    GOLDMAN SACHS 7/24/08

    Jul 24, 2008 AT&T Inc. (T): Estimate stability will be a catalyst for the stock.
    Are we there?
    WHAT'S CHANGED: Post 2Q08, our 2008 revs/EBITDA are $125.4bn/$45.6bn
    (-0.5%/+0.2%) and our EPS is $2.98 (down $0.03). This includes pressured wireless
    ARPU, wireline revs, and D&A somewhat offset by higher wireline margins.
    IMPLICATIONS: *Searching for estimate stability. AT&T has seen a steady
    downwards movement in EPS estimates over the course of the past 7 months, from
    $3.19 (โ€™08 EPS) at the peak down to $3.00 currently. The stock has struggled to find
    valuation support more recently as investors lost confidence in earnings trajectory. 2Q
    results and commentary could partially stem this, as the once-feared reset may already
    be embedded in current estimates for 2008. *What about 2009? The risk will shift to
    2009, as consensus estimates imply 12% earnings growth, which looks increasingly
    unlikely. *Still Buy-rated, but beware the โ€™09 estimate reset. We recently removed
    AT&T from our near-term Conviction Buy List as the estimate instability creates a
    tough backdrop. However, our core longer-term Buy rating remains with an 18-month
    (from 12-month), 2009YE $44 price target. Our Buy rating rests on the strength of the
    wireless platform, with a handset lineup that creates a sustainable advantage in data
    revenue growth. Additionally, cost-cutting capabilities and substantial share buybacks
    give AT&T additional built-in protection against a weaker macro.
    VALUATION: Our 18-month PT of $44 is up from $42 previously, most due to rolling
    forward a year, and is a triangulation of: (1) sum of-the-parts (5.0X โ€™09 EV/EBITDA
    for wireline, 7.0X for wireless, 5.0X for directory); (2) DCF (7.7% WACC, 2.0%
    perpetuity growth); and (3) historical relative P/E framework.
    KEY RISKS: (1) Economic risks spread to wireless. (2) IPTV technology platform
    risks.

 
T
41.07+0.20(+0.49%)Aug 25 4:01 PMEDT