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No offense to Stephanie Comfort, but Morgan Stanley has had a very close relationship with AT&T in the past (underwriting, advising, etc.) and this should always be considered when looking at a "recommendation". She has been out of step with the other analysts on "T" for quite a while, and frankly - wrong so far. With AT&T itself projecting 1997 earnings in a $2.45 - $3.00 share range, it's hard to see how they will get to $47/share. One possibility would be if serious cuts are made to cut corporate bloat, a la Al Dunlap, but from J. Walter's comments this week, I am not sure that is still a high priority. AT&T has a great brand name, and an opportunity to cut long-distance access fees (paid to the RBOCs) as well as expand in the local, wireless, internet, and international areas. But the new level of competition in its fields, combined with weak prior revenue growth and a stifling bureacracy makes this a tough one to predict. Jack Grubman is probably the most respected telecom analyst on Wall Street, and he is predicting $2.55/share for this year. Not many are buying the $5 - $6 earnings by 2001 that the company has targeted; that seems to be about as widely believed as the US Government balancing the budget by 2002. Sure, both would be nice, and are possible, but no one is holding their breath. I'd personally guess that "T" will find a level in the lower $30's, until Wall Street becomes convinced that John Walter is fully in charge and serious about restructuring. Only then might T's long suffering shareholders finally be rewarded, and this company's potential finally be unlocked. |
