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Foolish Forecast: AT&T's iPhone Ringer

By Dave Mock – Updated Apr 5, 2017 at 7:29PM

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Apple is expected to help AT&T carry the day.

Now entering the fiscal home stretch, it's almost time for telecommunications giant AT&T (NYSE:T) to deliver its third-quarter results to investors. Let's see how things are shaping up.

What analysts say:

  • Buy, sell, or hold the line? Of the 25 analysts weighing in on AT&T, 16 say the stock is a buy, while nine say hold. AT&T ranks as a four-star stock in our Motley Fool CAPS community, with 4,073 members weighing in with an opinion on the company.
  • Revenue. On average, analysts expect revenue of $31.3 billion this quarter, 4% higher than last year.
  • Earnings. The average analyst expectation for non-GAAP profits is $0.71 per share.

What management says:
The Apple (NASDAQ:AAPL) iPhone continues to impress even AT&T's management, as the recent launch of the iPhone 3G is surpassing expectations. CEO Randall Stephenson noted that "In the days following our exclusive U.S. launch of this new device, powered by the nation's fastest 3G wireless network, customer response has been everything we had anticipated and more."

The company believes the strong Apple brand behind the device will win out against more competition springing up from Research In Motion's (NASDAQ:RIMM) bold new Blackberry and the killer Instinct from Samsung and Spring Nextel (NYSE:S).

What management does:
While the iPhone is helping AT&T sign up plenty of customers, it's not running away with the market; Verizon (NYSE:VZ) is keeping pace. But those high-value customers tend to be sticky (thanks to those AT&T contracts) and pay more to help boost the company's average revenue per user (ARPU).

Metric

3/07

6/07

9/07

12/07

3/08

6/08

Net Additions (millions)

1.2

1.5

2.0

2.7

1.3

1.3

Churn

1.7%

1.6%

1.7%

1.7%

1.7%

1.6%

ARPU

$49.21

$50.63

$50.82

$50.28

$50.18

$50.60

Source: AT&T. For the three months ending in the stated month.

One Fool says:
AT&T looks well-positioned to weather a more constrained consumer spending holiday season. The new iPhone has a cheap entry price, and the company is heavily pushing its bundled services to save consumers and businesses money. It's also pushing its packages into more markets; its U-verse TV and Internet offerings will arrive on more than 600 Circuit City (NYSE:CC) and Wal-Mart (NYSE:WMT) shelves this month.

Like all telecommunication carriers, AT&T will certainly see line disconnects rise as people cut back on expenses. But a lower stock price and 6.3% yield on shares keeps many investors excited about AT&T's long-term prospects.

For more Foolishness:

Sprint Nextel and Wal-Mart are only two of dozens of stocks recommended by the Motley Fool Inside Value team to beat the market. To see what other stocks are trading below intrinsic value, check out a free 30-day trial of the newsletter service today.

Fool contributor Dave Mock never got into flocked Christmas trees. He owns no shares of companies mentioned here. Apple is a Stock Advisor recommendation. The Fool's disclosure policy was never a boy scout, but it can tie a killer loop knot.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$15.67 (-2.12%) $0.34
Walmart Stock Quote
Walmart
WMT
$131.31 (0.96%) $1.25
Apple Inc. Stock Quote
Apple Inc.
AAPL
$150.77 (0.23%) $0.34
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$38.93 (-1.49%) $0.59
Sprint Corporation Stock Quote
Sprint Corporation
S
BlackBerry Stock Quote
BlackBerry
BB
$4.97 (-1.97%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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