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AT&T Stock Is a Buy Ahead of Earnings, Analyst Says. Watch Its Subscriber Numbers.

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ATT said in June it expected higher margins in the second half of the year.

Dreamstime


AT&T

stock remains a Buy at Citi ahead of the company’s first earnings report since separating from


WarnerMedia
.

Analyst Michael Rollins expects


AT&T

(ticker: T) to report a mixed financial performance on July 21 as inflation and higher advertising costs could affect the bottom line. Indeed, the company warned in early June that it may have to raise prices again soon to offset inflation.

But there could be real upside to the stock if the company reports higher-than-expected sales volumes. Rollins is forecasting that net additional subscriptions for postpaid phones could tick up to a total of 600,000 for the quarter, while fiber- optic internet net adds could clock in at 300,000. Analysts surveyed by FactSet are predicting postpaid net adds of 546,000, and 293,000 for fiber.

AT&T could also be on track to deliver a solid improvement to margins, Rollins added. At a June investor conference, AT&T chief financial officer Pascal Desroches said the company was expecting to see margins expand during the second half of the year, as well as improved profit trends.

“AT&T management seems very focused on cost cutting,” Rollins wrote on Thursday.

Heading into earnings, Rollins is keeping an eye out for word from management about how the company is positioning itself to compete in a cutthroat wireless environment. He is also waiting on updates on the company’s 5G and fiberoptic rollout process, which lagged in the beginning of the year but may be picking up steam.

AT&T stock was down 0.5% to $20.35 in premarket trading. The shares have gained 10.1% this year.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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