Deutsche Bank sees buying opportunity in AT&T amid ‘FCF confusion’

Deutsche Bank says the firm would be buyers of AT&T post the 11% pullback off the Q1 free cash flow miss. While free cash flow of about $1B did come in light of the firm’s $1.25B forecast, the Street consensus was "materially higher" at $2.9B, the firm says, adding that "importantly" AT&T management had indicated at the the firm’s MIT conference in early March that Q1 free cash flow would be seasonally weak and similar, seasonality wise, to Q1 of 2022. The Q1 free cash flow figure equates to 6% of the full-year $16B guidance floor, in line with last year’s Q1 to full-year ratio of 5%, the firm points out. Deutsche did lower its 2023 free cash flow estimate to $16.3B, from $17.2B, to be closer to the floor of the company’s guidance, but argues that consensus of nearly $3B heading into the quarter "did not adequately reflect management’s intra-quarter commentary." The firm has a Buy rating and $23 price target on AT&T shares.