$T · Parkev Tatevosian, CFA · 2026-11-08

AT&T faces increasing competition as SpaceX invests heavily to expand its satellite-based network. Therefore, investors are wondering whether AT& T stock is a buy, hold, or sell option in light of this escalating competition.

I would answer that question by looking at AT&T’s business and future outlook, examining its balance sheet as it is one of the most indebted companies in the world, and comparing that to the valuation to determine if there is enough margin of safety to buy this stock, even with increased competition.

Interestingly, analysts who follow AT&T stock have raised their estimates for the company's earnings per share forecast over the next few years. Wall Street analysts expect AT&T to increase its earnings per share by more than 10% over the next few years .

If AT&T actually succeeds in achieving earnings per share growth of more than 10% over the next few years, it will be a great win for investors and will certainly add value for shareholders.

I am not very optimistic about AT&T's earnings per share growth prospects.

It operates in a saturated market with increasing competition, so for AT&T's profitability per share to grow, it is more likely to come from increased revenue per user rather than growth in the number of new users.

Other factors driving AT&T's profit growth include improved efficiencies, increased productivity, and generally better profit margins . In fact, over the past decade, AT&T has done an excellent job of boosting its operating margin from 16% to over 21.6% in the past twelve months.

These cost-saving initiatives are likely to lead to significant savings over time, and AT&T has been one of the companies using artificial intelligence to improve revenue per employee.

You mentioned that AT&T is one of the most indebted companies in the world.

At the time this video was recorded, AT&T's total long-term debt was over $178 billion. dollar. Building and maintaining its network is expensive, and it will likely need to do so again in the next couple of years as we move from 5G to 6G.

Given that AT&T already has a huge debt burden, and given that interest rates have risen since AT&T acquired most of that debt, the next wave could result in less expansion or less capital being made available for that expansion, putting it in a much more difficult position to compete against SpaceX.

Therefore, these headwinds and increased competition did not go unnoticed by investors. AT&T's rating declined over the past year. The stock was trading at a forward price-to- earnings ratio exceeding 12, and has now fallen to just under 8.4.

This price is among the cheapest to buy AT&T stock since 2024. Also, AT&T is more profitable today than it was two years ago when measured by operating profit margin .

In light of these recent developments, I took the opportunity to update AT&T's discounted cash flow valuation estimates, and my revisions were pointing downwards. I lowered my estimate for the free cash flow I expect AT&T to generate starting in 2028.

This is when I believe the impact of competition will begin to affect AT& T's results. I did not lower my estimate by a large amount. It was a decrease of less than 1%, but it was still a decrease nonetheless.

I think the trend will continue to decrease rather than increase if competition from SpaceX continues to spread .

In addition to lowering my estimates for AT&T's free cash flow, I also increased the risk as measured by the beta coefficient. Given the company's performance over the past five years, it has been far less risky than the outlook for the next five years suggests.

The industry and competition, or rather the lack of competition between them and Verizon and T-Mobile , allowed these three wireless service providers to achieve lucrative profits with limited competition.

With SpaceX threatening to expand, this could disrupt the industry and the status quo they have operated under for many years and decades . Therefore, from my point of view, this called for an upward reassessment of its future risks.

Overall, after all those estimates, I calculated the fair value of AT&T stock at $26.64. The current market price is $21.75.

Therefore, the stock still appears to be undervalued by approximately 22%. To answer the question I posed in the introduction, I still believe that AT&T stock represents a buying opportunity, but I am less confident in this rating.

I have lowered my level of conviction. I had a medium level of confidence and a medium level of conviction that it was a good buying opportunity, but today I have lowered the rating to a low level of confidence and a low level of conviction effective November 4, 2026.