Telecom Stocks Are No Longer One-Size-Fits-All, Analyst Says — Here's Which Company Stands Out

BofA Securities analyst Michael J. Funk reinstated coverage with a Buy rating on T-Mobile US Inc (NASDAQ:TMUS) and separate company notes.

The telecom industry is often viewed as homogeneous. Still, Funk noted that AT&T (NYSE:T), rated as a Buy with a price target of $32; T-Mobile, rated Neutral with a price target of $255 and Verizon Communications Inc. (NYSE:VZ), rated Neutral with a price target of $45, have unique characteristics tied to strategy, M&A, metric prioritization and return on capital.

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The analyst recommended a perceptive approach that prioritizes multiple expansion opportunities, return on capital, a well-defined fiber or wireless convergence strategy and estimates with greater upside potential than downside risk.

He noted that telecom stocks are under-owned by institutional investors and overlooked as being in a sleepy, mature industry.

However, since 2023, T-Mobile has posted a total return of 53%, AT&T logged 84% and Verizon fell short of the S&P 500 by 800bp at 27%, Funk wrote. Thus, the analyst said that company-specific factors, rather than industry strength or macro, are growing in importance as competition increases and strategies diverge.

AT&T has the most excellent flexibility to compete effectively and return capital, which he noted as the best opportunity to drive stock performance.

Funk noted that AT&T also offers the highest projected return on capital — dividends and buybacks in 2026 — at 7.2% of market cap.

The analyst noted that T-Mobile’s focus on net addition targets, coupled with a premium valuation, leaves less room for positive estimate revisions and multiple expansions.

He said Verizon is balancing responsible growth and protecting its premium subscriber base. Funk said its proposed acquisition of Frontier Communications adds execution uncertainty and should initially pressure free cash flow.

Territorial integrity is being tested, and competitive intensity is increasing, per the analyst. He noted that telcoms are expanding their broadband footprints through fiber builds, M&A, joint ventures and fixed wireless access (FWA).

Funk noted that cable companies are signaling greater competition as they defend broadband markets and strive for broadband or wireless convergence. Consequently, the analyst noted fewer opportunities for price increases to be prevalent and drive growth in the price times quantity equation.

He said handset subsidies and buyout offers may increase as carriers and cable companies seek to catalyze churn, grow subscribers and lock in stickier converged customers.

Funk said executive and legislative actions, such as immigration and bonus depreciation, are tangential factors for telcom stock performance. The analyst noted the bonus tax depreciation passage was positive for AT&T and Verizon and neutral for T-Mobile.

He estimated that reinstating bonus depreciation would increase AT&T’s 2026E and 2027E free cash flow by 21% and 26%, respectively.

Immigration reform is a drag on wireless but is manageable, said Funk. The analyst estimated the immigration reform risk to be at least 2.1 million potential subscribers. However, he noted the risk is contained as 20% or less of subscribers at AT&T, T-Mobile and Verizon are prepaid, and deep-value Mobile Virtual Network Operator (MVNO) brands are most likely to face material subscriber loss.

Price Actions: T-Mobile stock is down 1.18% at $237.91; Verizon is down 1.65% at $42.83 and AT&T is slightly up at $28.34 at publication on Monday.

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