Is it time to invest in AT&T stock?
Stock Name and Trading Stock Exchange Platform
AT&T Inc – New York Stock Exchange (NYSE: T)
The Stock Sector
AT&T is a goliath corporation in the telecommunications and other industries It specializes in wireless communication carrier services which make up approximately 40% of its revenue.
AT&T operates through four main segments;
- Business Solutions;
- Consumer mobility;
- Entertainment group; and global.
Other large interests include Media assets such as;
- Warner Media;
- Tuner Cable Networks; and;
- Warner Brothers studio.
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AT&T has a huge customer base, estimated at a little short of 100 million. It operates around the globe in over 190 countries.
AT&T also provides services and products ranging from data/broadband, Internet services, digital video services, local and long-distance telephony, and managed networking, among others.
It dates its origin back to the 19th century, founded by the infamous inventor, Alexander Bell. It is headquartered in Dallas, USA. AT&T is ranked 9th in the fortune 500 lists as of 2022.
Recent News on AT&T
AT&T has been one of the most monitored stocks over the year. It has been on a bumpy ride over the year with a lot of downsides and occasional upsurges.
The company was heavily hit by the pandemic and has since been selling off its assets. It has a big debt crisis and has so far sold Crunchyroll, DirecTV, TMZ, Xandr, and AppNexus for billions of dollars.
The biggest M&A yet to come for AT&T is the merger with Discovery, Inc valued at $43B, this announcement was made in May 2021 and the deal is set to be finalized in April 2022.
The CEO came out in an earnings report stating his goal was to reduce their Debt-to-Equity ratio from 3.7 to 2.5. 2.7.
This debt burden has ladened the company’s scaling potential. This lag exhibited by AT&T has caused some to brand it as a dinosaur as it has not moved for over thirty years, suggesting it is facing extinction threats.
AT&T has cut dividends in the past months which worsened the situation for the company. This is both good and bad news.
For the company, it would enable them to avoid more taxation and focus on improving their operations by paying off their debt and repurchasing shares.
Many were appalled by the move as it seems to drive away investors who have prioritized dividend investing in the past year. Dividend funds have outperformed the broad market.
AT&T has been restructuring to adopt the best model to attain value growth. It is currently racing against its arch-rivals Verizon and other significant players like T-Mobile.
Current Position of AT&T
AT&T is in a tough position at the moment. The company still employs a massive 203,000 employees. but this is a decline compared to previous years.
The market capitalization is at a wide $172.4, Despite being huge, the company has only been growing slowly with a countable number of curves over the years.
Their biggest problem is debt. The total debt for the AT&T is now over $203.56B. They are looking to reduce this to a reasonable ratio, especially before a spike in interest rates.
Telecommunications industries are generally viewed as dull due to their nominal growth that takes years without any exciting action.
AT&T has several subsidiaries including DirecTV, Bell Labs, and others. AT&T has a large base of institutional ownership accounting for 53% of outstanding shares.
AT&T currently trades at $24.14 as of 31 March 2022. It has been trading at a day range of $23.62- 24.14.
It has traded at a yearly high of $33.08 and a yearly low of $22.02. AT&T is trading way below its all-time highs. It saw its heydays at the beginning of the century around 2000.
It has dropped by nearly half from that point. Its all-time high during this period was $59.
The volume of shares traded for AT&T is currently at 41.61 million. AT&T’s fall over the years can be accredited to bust cycles, that is the crushing of the dot com and subprime bubble.
The fundamental model for AT&T is also flawed. Debt has kept them from growing and their expenses are too high. Their dividends were one of the highest in the market.
AT&T responds very slowly to the market hence its price might continue on a lateral path with little up & down movement.
AT&T has cut its dividend which might seem to repel investors short-term but it is a very strategic play. They believe to achieve about $20B in free cash flow by 2023.
If they can pay off their debt and buy back their shares consistently in the next few years, the stock will be heading on an upward trend. AT&T is very promising as they are cheap at the moment almost close to its intrinsic value.
Sentiment for AT&T
AT&T is surrounded by a lot of divergent opinions. Due to its very slow movements and now the cutting of the dividend has left it even duller than it was.
The company has now removed the bets on dividends and opted for value growth. Although dividends are still significantly high even after the cut.
While some are running away from the stock believing it’s dead, others see a wonderful opportunity to make an entry.
AT&T is very predictable hence trading it has been very easy for day traders. They buy during a surge and short during a downturn.
AT&T is very essential and will be required for years to come. Long-term investment in the stock is a good way to go about it alternatively, options trading could pay off.
Despite the company’s poor performance in recent years and the situation looking dire for them at the moment, they are not dead as some have boldly claimed.
AT&T might be a zombie, but it still has the potential for revival.
Profits for AT&T
AT&T is profitable notwithstanding its ups and downs. Profit has increased over the years, but is recently down over the past 2 years due to unfavorable market conditions.
Gross profit for 2021 was at $89.057B, a decrease by -3.01% year-on-year. Revenue for 2021 was down by -10.36% posted at $40.96B.
Net income over the past year has thankfully increased by an amazing +136.33%. Diluted EPS was at 0.69, a rapid rise of 135.38%. The dividend yield was at 4.70%.
The net profit margin was at 2.31%, an annual increase of 140.52%. Operating income also went up by 155% recorded at $7.50B.
The net change in cash however decreased by a jaw-dropping -523.81% recorded at -$89M. The cost of revenue was $19.80B, down by -13.60% year-on-year.
Cash and equivalents were at a strong $21.17B, jumping by +117% over the year. The profits for AT&T are okay at the moment but they need to maximize their margins to grow and scale to repay debts and stand financially.
Future of AT&T
The future for AT&T is not easy to determine. They are at a very critical point at the moment.
They have poured heavily into 5G as they believe this will be the future. This market needs to grow vastly for them to accomplish this in the least time. Competitors like Verizon are also eyeing the market share and want to take over the industry.
Verizon (NYSE: VZ) is doing better than them at the moment with a market cap of $213.95B, which is a bit larger than AT&T.
AT&T is on track to achieve its set target in the coming year. They are now looking to be more effective in the industry and not just larger. This includes strategies like lowering operating income and other unnecessary expenses in the business.
Selling off its assets might seem like a good way to cut off sectors that are wearing it down, but it also bears associated risks. The stock could trade even lower. This also holds too for the merger.
There is a disconnect between price and value with AT&T. If they improve their underlying core issues, they will take off to the surprise of the market.
Long-term liabilities are very worrying as it is many times larger compared to free cash flow. The return on invested capital by the company is not impressive only at 5.4%.
AT&T tends to perform better over the long-term as compared to the immediate period. It looks very resilient in the future and will bounce back with a vengeance.
Overall Verdict on AT&T
AT&T is looking very bearish in the immediate short-run but has very prospective in the medium to long-term.
AT&T has the benefit of being stable with very few blips seen in years. This may be good for people who do not like crazy volatility. It is a slow but sure stock.
Both moving averages and oscillators suggest AT&T as a sell. Therefore, it is an overall sell at the moment, but it should quickly get back up.
Options trading is the best way to capitalize on AT&T. Buying the cheap stock now and holding for a long haul could also be very lucrative in foresight.
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AT&T Stock Price Chart
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