Telecom giant AT&T (T -1.31%) has been dead money for years. Its share price is down 25% over the past decade. But AT&T's recent success in getting out of the entertainment business and growing its wireless business could change the stock's trajectory.

Could AT&T double in price over the next 12 months? Hey, anything is possible, and it's not as crazy as you might think. Either way, AT&T could soon be a stock on the rise. I'll show you the evidence that AT&T could be one of 2023's genius stock moves.

Compressing the spring

AT&T isn't going to blow anyone away with growth. The company has grown revenue by a total of 28% over the past decade, so that's not going to be the reason the stock appreciates enough to double. Instead, it would be best if you considered AT&T's valuation over time:

T PE Ratio (Forward) Chart

T PE Ratio (Forward) data by YCharts

Trading at a price-to-earnings ratio (P/E) of 7, the stock is far below where it's been valued throughout the past 10 years. Its median P/E over that time is 13.

Valuations can act like a compressed spring; they can keep getting pushed lower until a positive catalyst excites Wall Street. The stock can go far in a short time if the market dramatically changes the valuation it's willing to pay for the stock. That's where AT&T's best shot at doubling next year will come from, I believe.

Sparking the upside

So how could AT&T's business excite Wall Street enough to unleash this compressed valuation? As many know, AT&T ultimately got out of the entertainment business earlier this year and is now a focused communications business once again. So far, AT&T's emphasis on its core business is paying off.

AT&T is the leading wireless carrier in the United States today with 45% of the market, which could continue to grow. The company has added a net 2.2 million new post-paid phones through three quarters of 2022. Competitor Verizon has the second-highest share of the U.S. market and lost 16,000 phone subs in 2022.

That's a clear night-and-day difference, showing that AT&T is executing at a far higher level. The added phone lines drove 5.6% wireless revenue growth year over year in Q3, which the company proclaimed was its best increase in more than a decade.

There is one big catch

AT&T took on a ton of debt trying to buy its way into the entertainment and media business, and that bloated balance sheet is the primary reason the stock's valuation has suffered in recent years.

The spin-off deal earlier this year did give AT&T a substantial cash infusion, which helped pay down $43 billion of debt. However, there is still $133 billion in long-term debt, putting AT&T's debt-to-EBITDA ratio at 3.1. That ratio is still a bit high, and shows that more progress is needed.

T Cash and Short Term Investments (Quarterly) Chart

T Cash and Short Term Investments (Quarterly) data by YCharts

Unfortunately, that much debt won't go away overnight, and could prevent the stock from getting the massive jump in value that investors are hoping to see. But if AT&T keeps picking up new customers, it's hard to be down on the stock at this valuation, even if shares don't quite double by the end of next year.