Wall Street just sent a clear signal to income investors who count on AT&T for steady payouts.
Morgan Stanley slashed its price target on the telecom giant, and the reason has little to do with AT&T’s (T) own performance.
The real threat is coming from space. Elon Musk‘s Starlink satellite network is growing fast enough that analysts now believe it will meaningfully dent the broadband and wireless business every major U.S. carrier depends on.
For AT&T shareholders who rely on the stock’s dividend, this is worth close attention.
Starlink has Wall Street on edge
Morgan Stanley (MS) analysts led by Sean Diffley cut AT&T’s price target to $25 from $30 in a July 7 research note shared with me, while keeping an “overweight” rating on the stock.
Diffley and his team pointed to a broader shift in investor psychology, as much as any single company’s fundamentals.
“The fear of the unknown has led many to shoot first and ask questions later in Telecom,” they explained.
The firm made similar cuts across the sector, trimming T-Mobile’s target to $230 from $260 and Comcast’s to $30 from $33.
Morgan Stanley now expects Starlink to reach about 16 million broadband subscribers in the United States by 2030, up from roughly three million at the end of 2025. That is enough growth to start pulling customers away from cable, fixed wireless, and even fiber.
The bigger worry is what happens after 2027. SpaceX plans to launch newer V3 satellites that carry far more capacity than today’s fleet, and the company is also rolling out satellite service that connects directly to regular cell phones.
Related: AT&T may be left out of the Starlink deal everyone wants
Morgan Stanley expects direct-to-phone service to expand from 480 satellites in 2027 to 3,500 by 2030.
None of this means satellite internet is about to replace fiber or wireless overnight. Physical limits on capacity still make satellites better suited to rural areas than crowded cities.
But the pace of improvement is fast enough that analysts are now incorporating it into long-term forecasts for every major carrier, which is pushing valuations lower across the board.
What the price cut means for AT&T specifically
AT&T’s new $25 target implies the stock trades at roughly 6.5 times forward EBITDA, and about 10 times forward earnings.
Analysts tracking AT&T stock forecast that adjusted earnings per share will expand from $2.12 in 2025 to $3.40 in 2030. However, these forecasts could narrow if Starlink gains significant traction over the next few years.
Morgan Stanley also trimmed its long-term subscriber estimates for AT&T. The firm now expects AT&T to add 350,000 fewer fixed wireless customers and 100,000 fewer fiber customers by 2030 than it previously projected.
According to the Morgan Stanley research report:
- Building out fiber to a single new customer runs AT&T somewhere between $2,400 and $2,400 per subscriber added.
- Comparatively, Starlink can add a customer for closer to $669.
- AT&T has to keep spending heavily on fiber to defend its market share, even as a cheaper rival expands in the background.
There is also a churn problem hiding inside AT&T’s own customer base.
According to Morgan Stanley’s annual survey work, 57% of AT&T’s DSL customers say they are likely to switch providers in the next year, and 43% of AT&T Fiber customers say the same.
That is a lot of potential turnover for a company trying to protect its subscriber count.
Kevin Carter/Getty Images
AT&T’s dividend still has a defense
The fundamental risk for dividend investors stems from the intense capital spending required to defend market share. Upfront capital costs per added fiber subscriber are estimated to be 2.3x to 6.4x higher than satellite deployments.
If higher build costs or lower-than-expected broadband penetration rates hamper AT&T’s deployment, free cash flow will be under severe downward pressure, limiting the excess capital available for shareholder returns.
More AT&T:
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- AT&T lands Rivian win as Wall Street sees growing threat
Notably, AT&T had cut its annual dividend from $2.08 per share in 2022 to $1.11 per share today, due to rising interest payments and an unsustainable dividend payout.
None of this means AT&T’s dividend is in immediate danger.
Management has committed to returning more than $45 billion to shareholders through dividends and buybacks between 2026 and 2028, a plan that CEO John Stankey reaffirmed at the company’s annual shareholder meeting in May.
AT&T is also leaning on new bundled offers, including its OneConnect wireless and broadband package, to keep customers signed up for multiple services at once.
Stankey has said customers who buy both internet and wireless from AT&T tend to stick around longer and generate more profit per account.
Morgan Stanley’s estimates still show AT&T’s free cash flow growing from about $18.3 billion this year to more than $21 billion by 2028, according to the firm’s base case model.
That gives AT&T room to keep funding its dividend, even while spending heavily on network upgrades.
Still, the direction of the price target cut tells investors something important. Analysts are no longer treating satellite competition as a distant, rural-only threat. They are building it into valuation models today, and that is compressing the multiples investors are willing to pay for AT&T and its peers.
For dividend-focused investors, the payout looks safe for now. But the days of assuming AT&T’s stock will simply grind higher on the back of a stable, low-competition market appear to be over.
Related: AT&T leaves rivals flat-footed as bankrupt carrier folds
