An analyst at BNP has taken a positive view of AT&T's stock, writing that investors should have 'little to quibble with on the mobile side'

AT&T could benefit from recent price increases and then boost prices even further, an analyst says.

AT&T's stock has struggled for momentum this year, but with various challenges now well understood by the market, one analyst thinks it's set to gain.

BNP Paribas analyst Sam McHugh raised his rating on AT&T's stock (T) to outperform from neutral on Monday. He called AT&T shares "the best way to play tailwinds in wireless" heading into the end of the year.

Those tailwinds include benefits from higher-priced wireless plans as well as a more "muted" iPhone launch cycle in the third quarter, which could help protect profits for carriers. since device subsidies are normally a big cost.

"The sector is running out of new things to worry about," McHugh added. He noted that AT&T investors have been concerned about a number of issues this year, including more competitive backdrops for both wireless and internet service. There's been the threat of SpaceX (SPCX), which has big ambitions in the telecommunications space, and even the threat of artificial-intelligence agents, which could autonomously renegotiate customer wireless bills and seek out lower prices.

So why upgrade AT&T's stock now? McHugh said it's "not that these risks have all gone away" but rather that "the surprise factor has run its course." AT&T is also the "least exposed" to SpaceX's mobile ambitions, since it has the smallest market share among the three largest U.S. mobile operators, according to McHugh.

"We see the company beating on wireless volumes, price and profits simultaneously, leaving investors little to quibble with on the mobile side," he wrote.

Over the longer term, he thinks AT&T and its rivals might have more room to further increase wireless prices than investors appreciate. He understands why investors would be skeptical, as AT&T's average revenue per user hasn't even kept up with inflation. "At the same time, consolidation in the sector is allowing all three players to produce acceptable returns without going gangbusters," McHugh wrote.

He raised his price target on AT&T's stock to $30, implying that he sees room for it to rise 18%.

AT&T shares are up fractionally in morning action on Monday, while T-Mobile shares $(TMUS)$ are down 3.2% and headed for their lowest close since May 15, 2024, according to Dow Jones Market Data. Verizon Communications shares (VZ) are down fractionally.

-Emily Bary