Three catalysts drove AT&T's (T +0.68%) stock price nearly 50% higher over the past two years.
- It abandoned its costly efforts to build a media empire and spun off DirecTV, Time Warner, and its other media assets.
- It expanded its fiber optic and 5G networks, and those two core businesses gained millions of new subscribers.
- The combination of inflation, rising interest rates, geopolitical conflicts, and threats of higher tariffs drove many investors back toward safe-haven dividend stocks like AT&T again.
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From 2024 to 2027, analysts expect AT&T's EPS to grow at a compound annual rate of 19% as it keeps expanding its higher-margin 5G and fiber businesses while tightly controlling its expenses. Trading at $26.50 per share and 12 times this year's earnings, it still looks like a bargain. It also pays an attractive dividend that (at the current price) yields 4.2%.
Assuming AT&T's performance matches those estimates and that it still trades at 12 times forward earnings as of the beginning of 2027, its stock price would rise by about 13% to $30, boosting its market cap from $191 billion to $216 billion. That would be a decent result for investors, but two other undervalued tech stocks have the potential to generate even bigger gains over the next two years.
NYSE: T
Key Data Points
Verizon Communications
Verizon Communications (VZ 0.17%), one of AT&T's top competitors in the U.S. wireless market, struggled to gain more wireless subscribers in 2023. It mainly blamed this difficulty on aggressive promotions from its competitors.
But in 2024, Verizon more than doubled its postpaid phone net additions as it localized its incentives and marketing campaigns, expanded its customizable "myPlans" to reach more customers, and grew its distribution partnership with Walmart. It also expanded its prepaid wireless business by acquiring TracFone, and its total wireless retail churn rate declined.
NYSE: VZ
Key Data Points
From 2024 to 2027, analysts expect Verizon's EPS to grow at a compound annual rate of 7% as it streamlines its spending and its wireless business stabilizes. It might grow a bit slower than AT&T, but it looks significantly cheaper at 9 times this year's earnings. Its dividend yield of 6.2% is also much higher.
If Verizon matches Wall Street's estimates and the market revalues the stock to match AT&T's current forward earnings multiple of 13, its stock would rise by 52% from $43.50 today to about $66 by early 2027. That would boost its market cap from $183 billion to $278 billion -- so it certainly has a shot at eclipsing AT&T's valuation if its cost-cutting efforts offset the pressure from its promotional strategies.
Micron Technologies
Micron Technologies (MU 3.19%), one of the world's largest manufacturers of memory chips, is a cyclical company -- like the rest of its industry, it goes through boom and bust cycles. Its last bust occurred in 2023 when the PC market lapped its pandemic-driven growth spurt, fewer consumers bought 5G phones, and more data centers prioritized purchases of AI graphics processing units (GPUs) over memory chips.
But from its fiscal 2024 (which ended in August) to its fiscal 2027, analysts expect Micron's revenue and EPS to grow at compound annual rates of 20% and 151%, respectively. Those are high growth rates for a stock that trades at just 16 times this year's earnings.
NASDAQ: MU
Key Data Points
Micron's revenue growth is heating up again as the PC and smartphone markets stabilize and data center customers install more solid-state drives (SSDs) and high-bandwidth memory (HBM) chips to support the latest cloud and AI applications.
Assuming that Micron's performance matches analysts' expectations and that it continues to trade at 16 times forward earnings, by the beginning of its fiscal 2027, its stock price would rise by about 78% from $100 to $178, boosting its market cap to just over $200 billion. But if its forward multiple rises to 20, its stock price would surge 122% to $222 and drive its market cap to $255 billion.
All three stocks could still be good value plays
Verizon and Micron both have the potential to surpass AT&T's market cap over the next two years, but all three of these stocks could still be good value plays in this frothy market. Verizon and AT&T should remain attractive dividend plays for conservative investors as fixed-income yields wobble, while Micron's fresh growth cycle could continue for at least a few more years.
