AT&T Drops 10.6% in a Week as Analysts Cut Targets Post-Earnings

AT&T shed 10.6% over the past week to close at $20.94, a move that dwarfs the median 1.8% decline among its closest telecom peers and leaves the stock at levels not seen in recent memory, even as the short book that built into Q3 earnings continues to shrink.

The price action stands in sharp contrast to the short-side story. Short interest has fallen further since the post-earnings unwind flagged in the October 21 note. It now stands at roughly 125 million shares, 1.76% of the free float, down another 5.5% on the week and well below the 144 million-share peak from early October. The borrow market offers no constraint whatsoever. Cost to borrow has dropped to 0.23%, down 40% on the week, and availability is enormous: over 3.76 billion shares remain available to lend, giving an availability ratio of more than 7,000%. That means lenders hold roughly 30 shares available for every one already borrowed. The short score of 32.0 is unremarkable and has been stable for two weeks. This is not a stock where the weakness is being driven by a growing short position. The selling has come from somewhere else.

The most likely somewhere else is the analyst community. The October 22 response to Q3 results produced a wave of target cuts. Morgan Stanley's Simon Flannery, who had raised his target to $28 just three weeks earlier, cut it back to $25 while keeping an Overweight rating. JP Morgan trimmed from $33 to $31, also maintaining Overweight. Barclays moved its target from $24 to $21 and kept Equal-Weight. KeyBanc cut from $36 to $33. The pattern is consistent: firms that had been constructive are pulling in their numbers without abandoning their ratings. The consensus mean target now sits at $27.72, implying roughly 32% upside from current levels, but that figure has been moving lower. The earnings yield factor ranks in the 89th percentile and EV/EBITDA of 6.1x looks undemanding, but the price-to-book has fallen sharply, down 0.23 points over the past 30 days to 1.26x, reflecting how quickly the share price has moved relative to book value. The bear case is not hard to articulate: wireless service revenue growth is slowing toward 2%, the legacy copper business turns into a meaningful EBITDA drag beyond 2027, and the payout ratio is expected to stay above 100% for at least two more years.

Among peers, the week's move is an outlier. VZ fell just 1.4%. ELISA on the Helsinki exchange was the only peer approaching similar territory, down 10.4% on the week. BCE and ATNI were essentially flat. The divergence rules out a sector-wide re-rating as the main driver. AT&T's specific problem this week was the magnitude of the target reductions, coming on top of a stock that had already given up 17.5% over the past month.

One data point that cuts against the gloom: buyback activity. SEC filings show AT&T repurchased 86 million shares in Q2, a 153% increase on the same quarter a year earlier, spending $2.19 billion, up 128% year-on-year. That is a material acceleration in capital return. Wikipedia page views have also ticked up, with a retail attention z-score of 1.92 against the stock's own 90-day history as of October 22, which is consistent with the kind of price dislocation that draws new eyeballs. Insider activity over the past 90 days is neutral in aggregate: the September 30 awards to the CFO and COO were compensation grants, not open-market purchases, and CEO John Stankey's October 23 transaction was a gift of 13,000 shares, carrying no informational value on direction.

The specific thing to watch is whether analysts with Overweight ratings begin to downgrade rather than just trim targets. Morgan Stanley and JP Morgan both reduced price targets on October 22 without changing their positive stance. If the stock continues to trade near or below the lowest published target (Barclays at $21), the pressure on those ratings becomes harder to sustain.