Morningstar maintains $37 PT:
"We view AT&T’s start to 2019 somewhat more optimistically than the market seems to. While the wireless business and WarnerMedia performed about as we’d expected, the entertainment segment put up surprisingly strong margins. On a consolidated basis, cash flow was solid and the firm made nice progress in its effort to repay debt. Our view of AT&T is unchanged, and we don’t expect to materially alter our $37 fair value estimate. With the market’s negative reaction to earnings, we continue to view AT&T shares as undervalued.
AT&T reported a loss of 544,000 “premium” television customers (its combined satellite and U-verse subscribers) during the first quarter, a figure that appears to have benefited from 117,000 customers not disconnected as a result of a policy change. In any case, customer losses were, by far, the worst on record. The firm’s online television offering, DirecTV Now, also lost customers for the second consecutive quarter (83,000). On the flip side, AT&T easily bested our expectations for revenue per customer. While we remain bearish on the long-term potential of the television business, AT&T’s performance in the quarter far surpassed our expectations, as total television revenue declined only 2% year over year (we expected a 6% decline in 2019).
Total entertainment segment revenue declined 0.9%, the best result in more than a year. With relative revenue stability and continued cost cutting, AT&T also exceeded its promise to stabilize segment margins in 2019. We suspect that a sharp decline in satellite television customer installations, which entail significant upfront expense, played a significant role in cost cutting. If so, we appreciate the decision to absorb customer losses rather than chase uneconomical growth. Still, we expect changing customer habits and preferences will cause a persistent loss of television customers and declining profitability per customer, pressuring entertainment margins over the next several years".
