AT&T (NYSE:T) Has Some Swagger Left Says FBR

The share price of AT&T (NYSE:T) has been priced at a worst-case scenario, according to FBR, who believes the company still has the ability to exceed moderate expectations going forward.

FBR says, "Overall, AT&T demonstrated its ability to outperform modest expectations in FY10, and we believe that this trend should continue in FY11. At this point, we believe that shares are pricing in a worst-case scenario regarding the Verizon iPhone, and "only" moderate net postpaid weakness in FY11 will improve investor sentiment. The next potential catalysts are (1) fewer-than-expected net postpaid losses from the Verizon iPhone launch in February; (2) the potential for a period of iPhone 5 (Nasdaq:AAPL) exclusivity this summer and/or higher HSPA+ network speeds; (3) benefits of progressive wireless data network improvements and substantially higher spending on voice capacity; (4) revenue momentum from the combination of a higher smartphone mix and higher price tiers; (5) sustained cost-structure improvements; (6) potential voice capacity challenges on the Verizon network as voice carriers are replaced with data carriers; and (7) a stronger dividend outlook relative to Verizon, which is likely to continue to invest heavily in its cloud-based initiative-$17B over 5-10 years. These factors underpin our Outperform thesis for T relative to Verizon (NYSE:VZ)(Market Perform), and we believe that shares of Verizon are pricing in perfect execution in FY11, while shares of T have discounted the potentially significant challenges in FY11." (FBR lowers FY11 EPS estimate of AT&T from $2.77 to $2.35).

FBR Capital maintains an "Outperform/Top Pick" rating on AT&T (T), which was trading at $27.57, down $0.56, or 1.99 percent, as of 1:47 PM EST. FBR has a price target of $34 on AT&T.