AT&T Stock: Is the Telecom Giant a Buy After the SpaceX Threat?

AT&T (NYSE: T) is facing renewed pressure as Elon Musk's SpaceX prepares to challenge America's established wireless operators. With takeover speculation, growing satellite competition and concerns about debt, investors are questioning whether AT&T is becoming a value trap or an attractive dividend opportunity.

The arrival of Starlink-powered wireless services introduces a new competitive challenge. Following the recent weakness in AT&T shares, is this an opportunity to buy one of America's largest telecommunications companies?

Let's examine its financial performance, dividend sustainability and long-term prospects.

1. Why Is AT&T Stock Under Pressure?

The latest concerns surrounding AT&T are largely connected to Elon Musk's plans to expand SpaceX into wireless telecommunications.

Speaking at the Baron Investment Conference on November 6, Musk suggested that SpaceX could acquire an established telecommunications operator to gain access to its licensed wireless spectrum.

Although he did not identify a potential acquisition target, his comments triggered speculation about AT&T, Verizon and T-Mobile.

There is currently no confirmed agreement or announced negotiation for SpaceX to acquire AT&T.

SpaceX has also explored acquiring Boost Mobile from EchoStar, potentially giving it an established customer base and a stronger entry into the wireless market.

The bigger concern is that SpaceX could eventually become a direct competitor rather than simply a satellite internet provider.

2. Can Starlink Become a Serious Threat to AT&T?

This is perhaps the most important question for investors. SpaceX is developing a hybrid wireless network combining satellite connectivity with traditional terrestrial infrastructure.

Its ambitions extend beyond providing internet access in remote locations. The company wants to become a meaningful participant in the US wireless market.

Its expansion plans include:

• Significant investments in wireless spectrum.

• Access to approximately 80,000 cellular sites.

• Partnerships with Qualcomm to develop terrestrial 5G infrastructure.

• Combining Starlink satellite connectivity with conventional mobile networks.

This could introduce a powerful new competitor into an industry historically dominated by AT&T, Verizon and T-Mobile.

However, building a nationwide wireless network requires enormous capital, infrastructure, regulatory approvals and customer adoption. AT&T still has significant advantages, including its extensive fibre-optic network, established customer relationships and existing wireless infrastructure.

Starlink represents a genuine long-term competitive threat, but it does not mean AT&T's business model is becoming obsolete overnight.

3. AT&T's Financial Performance Remains Encouraging

Despite the negative headlines, AT&T's operating performance has shown improvement.

In its third-quarter 2026 earnings report, the company delivered:

Financial metric	Q3 2026
Revenue	$32.3 billion
Revenue growth YoY	5.3%
Adjusted EPS	$0.65
Adjusted EBITDA	$12.5 billion
Free cash flow	$5.0 billion
Postpaid phone additions	379,000
Internet customer additions	769,000

One encouraging development was broadband growth, including 442,000 fibre subscribers. AT&T is increasingly positioning itself as an integrated connectivity provider rather than relying exclusively on traditional mobile subscriptions.

Management also raised its 2026 adjusted earnings guidance to approximately $2.40 per share. It expects free cash flow to exceed $18 billion in 2026, increasing to more than $19 billion in 2027 and $21 billion in 2028.

These projections highlight the company's cash-generating potential despite growing competition.

4. Is AT&T's 5% Dividend Yield Sustainable?

For income-oriented investors, AT&T's dividend remains a major attraction. The company pays an annualized dividend of $1.11 per share. At approximately $21.80, that translates into a yield of roughly 5.1%.

More importantly, the dividend appears reasonably supported by projected free cash flow. With management expecting more than $18 billion in free cash flow during 2026, AT&T should have sufficient cash generation to support its dividend while investing in its network.

However, investors should not overlook its debt. Following substantial investments in spectrum and fibre infrastructure, AT&T's net debt leverage reached approximately 3.1 times adjusted EBITDA in Q3.

The company must balance dividend payments, infrastructure investment and debt reduction. A high dividend yield is attractive, but sustainable cash generation is what ultimately matters.

5. Is AT&T Stock Undervalued?

At approximately $21.80, AT&T is trading considerably below its 52-week high of $29.44.

Its forward P/E ratio is also relatively inexpensive at approximately 9, based on projected 2026 adjusted earnings.

Some analyst valuations suggest meaningful upside:

• Morningstar recently maintained a $26 fair value estimate, describing the shares as undervalued.

• The average 12-month analyst price target reported by Google Finance is approximately $28.32.

• Analyst opinions remain divided because of competition, debt and future growth concerns.

These valuations suggest potential upside if AT&T maintains profitability and executes its strategy.

However, price targets are estimates, not guarantees. Increased competition could put pressure on pricing and future earnings.

6. Jim Cramer Says Investors Should Avoid AT&T

The SpaceX developments have also attracted criticism from CNBC's Jim Cramer. On November 6, Cramer advised a caller against owning AT&T, highlighting Elon Musk's aggressive approach to competition and SpaceX's technological ambitions.

His concerns reflect a broader question: could SpaceX eventually pressure AT&T's wireless pricing, customer retention and profit margins?

Nevertheless, investors should distinguish between a potential future threat and an immediate deterioration in financial performance. AT&T continues to generate substantial cash flow, expand its fibre business and grow its connectivity customer base.

7. Is AT&T a Buy?

AT&T presents an interesting opportunity for investors seeking dividend income and potential capital appreciation.

At approximately $21.80, its combination of a 5.1% dividend yield, relatively inexpensive valuation and improving operating performance makes the stock worth considering.

However, the risks remain significant.

SpaceX could become a formidable competitor, while AT&T's substantial debt and capital requirements limit its financial flexibility. I would view AT&T as a potential income and recovery investment rather than a high-growth technology opportunity.

For long-term investors, gradually accumulating shares during periods of weakness could make sense, provided cash flow, dividend coverage and customer growth remain healthy.

I'm of the view that AT&T is worth watching as a potential buy, but I would favour a gradual entry rather than committing a large position immediately. The next few quarters will be important in determining whether AT&T can defend its market position while improving profitability.

Ultimately, the question is not whether SpaceX will enter the wireless market. It is how much market share and pricing power it can take away from established operators.