Wall Street Analysts Think AT&T (T) Is a Good Investment: Is It?

Core Viewpoint - The article discusses the reliability of Wall Street analysts' recommendations, particularly focusing on AT&T (T), and highlights the potential misalignment of brokerage firms' interests with retail investors [1][4][9]. Group 1: Brokerage Recommendations for AT&T - AT&T has an average brokerage recommendation (ABR) of 1.80, indicating a consensus between Strong Buy and Buy, based on 28 brokerage firms [2]. - Out of the 28 recommendations, 16 are classified as Strong Buy, while 3 are classified as Buy, representing 57.1% and 10.7% of total recommendations respectively [2]. Group 2: Limitations of Brokerage Recommendations - Solely relying on brokerage recommendations for investment decisions may not be advisable, as studies indicate they often fail to guide investors effectively towards stocks with high price appreciation potential [4][9]. - Brokerage analysts tend to exhibit a positive bias in their ratings due to vested interests, leading to a disproportionate number of favorable ratings compared to negative ones [5][9]. Group 3: Zacks Rank as an Alternative - The Zacks Rank, a proprietary stock rating tool, categorizes stocks from Strong Buy to Strong Sell and is based on earnings estimate revisions, which have shown a strong correlation with near-term stock price movements [7][10]. - The Zacks Rank is updated more frequently than the ABR, making it a more timely indicator for predicting future stock prices [11]. Group 4: Current Earnings Estimates for AT&T - The Zacks Consensus Estimate for AT&T's current year earnings has decreased by 3% over the past month to $2.12, reflecting analysts' growing pessimism about the company's earnings prospects [12]. - This decline in earnings estimates has contributed to a Zacks Rank of 5 (Strong Sell) for AT&T, suggesting caution despite the favorable ABR [13].