Oppenheimer’s Timothy Horan maintains a Buy rating on AT&T, with a price target of $46.
What The Merger Means
“The merger allows T to combine leadership in distribution with a portfolio of high-quality content,” Horan mentioned, while adding that the deal was expected to be 4 percent accretive to AT&T’s EPS and free cash flow per share in 2018, with $1.5 billion in pretax synergies.
“T’s stock usually trades sideways while large transactions are announced with outperformance the year after closing, which should take nine months,” the analyst went on to say.
The deal requires a review by the Department of Justice (DoJ), and Horan pointed out that the DoJ has never rejected a vertical merger, although there is likely to be meaningful “political noise” around the acquisition.
However, the analyst also believes that the merger would be positive for towers, fibers, datacenters and CDNs.
Horan believes this acquisition is in line with AT&T’s goal of growing OTT video, especially over mobile, which could help reduce churn.
The analyst also stated, “The transaction is somewhat defensive as the hyper-scale Internet companies are also looking to provide OTT video services,” and that controlling content would allow the company to create a more differentiated service, along with ensuring better control costs.
At last check, AT&T was down 1.52 percent at $36.92, while Time Warner was down 2.26 percent at 87.45.
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|Oct 2016||Drexel Hamilton||Downgrades||Buy||Hold|
|Oct 2016||Cowen & Co.||Downgrades||Outperform||Market Perform|
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