Deutsche Bank upgraded AT&T (NYSE:T) Monday morning to a “buy” rating from “hold” and lifted its 12-month price target by $1 to $31, essentially calling for about 20% of upside over the next year. The firm argued that Ma Bell should be able to sustain double-digit core earnings growth into next year. Potential near-term catalysts for continued growth include a buyback and a dividend increase. Additionally, the firm thinks concerns about the potential loss of the iPhone exclusivity contract may be overblown (or already priced into the shares).
Technically speaking, T shares have been range-bound for the past year or so, with little movement below 23 or above 26. Last Thursday, the stock gapped higher, however, thanks to a positive earnings surprise. Upward momentum continued through Friday and Monday, and the shares have now moved back above their 200-day simple moving average for the first time since April.
For investors interested in adding options to their portfolio, we’ve outlined two strategies below – one for those who agree with Deutsche Bank’s positive outlook and one for AT&T bears. These strategies are examples and do not constitute buy/sell/hold recommendations. Prices are given as of Monday late afternoon, when T was trading at $25.95, up 41 cents.
