Walter Piecyk: ‘AT&T should trade at parity if not higher than Verizon’

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The only reason why AT&T Inc (NYSE: T) is trading at a discount versus its rival Verizon Inc is a “legacy view” that it’s under bad management, said LightShed Partners Walter Piecyk on CNBC’s “Squawk Box”.

Highlights from Piecyk’s interview with CNBC

Piecyk added, however, that AT&T has now pulled out of all the “bad stuff”, evident in its rising free cash flow and growth rate that closely matches T-Mobile and Verizon. He said:

Given that AT&T has effectively stolen DISH as a wholesale customer away from T-Mobile that had a spat with Charlie Ergen, AT&T has the opportunity to outgrow T-Mobile and even Verizon in terms of service revenue growth.

According to Piecyk, if the management does well in the new era of 5G connectivity and delivers on growth that’s equal or better than the rivals, then AT&T shouldn’t trade at a discount. He added:

Now that they’ve cut the dividend, they’re spending less of their free cash flow on dividends than Verizon. Why shouldn’t they trade at parity if not higher than where Verizon is on a dividend yield.

Why AT&T stock might continue downward

During the same interview with CNBC, Axios media reporter, Sarah Fischer, agreed that AT&T’s fundamentals were strong but warned the stock might still continue to decline due to uncertainty. She said:

The problem is that people are not looking at the fundamental business. They’re just freaked out about the dividend cut happening in 2022. So, between now and then, the stock is on a stagnant mode because we don’t know what’s going to happen.

Fischer also sees “hyper-competition” in the telecom sector as another challenge for AT&T.

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