Ah, AT&T. (NYSE: T), the name itself conjures up images of a telecom giant, a behemoth that’s been around since what feels like the dawn of time. But let’s cut to the chase: AT&T’s stock has been acting like a yo-yo on a caffeine high.
Like many investors, I have bought and sold T stock for many years. It was one of my favorite stocks to write covered calls.
One minute it’s up; the next, it’s down. So, what’s the deal? Is it time to jump ship or double down? Buckle up, folks; we’re about to dive into the nitty-gritty.
The Financial Landscape
The Numbers Game
First off, let’s talk turkey. According to Wikipedia, as of 2023, AT&T is the world’s third-largest telecommunications company by revenue. They raked in a whopping $120.7 billion in 2022. Not too shabby, eh? But wait, there’s more. The company’s revenue for June 2023 was $29.92 billion, a modest year-over-year increase of 0.92%.
- Net Income: $4.49 billion, up by 7.99% from the previous year.
- Diluted EPS (Earnings Per Share): 0.61, marking an 8.93% increase.
- Net Profit Margin: 15%, up by 6.99%.
For those scratching their heads over terms like “Diluted EPS,” it’s basically a measure of a company’s profitability on a per-share basis. A higher EPS generally means the company is more profitable.
The Analysts Weigh In
Now, let’s talk about what the Wall Street wizards have to say. According to Nasdaq, 54 analysts covering AT&T have a median target price of $22.13. The estimates are all over the map, ranging from a high of $32.00 to a low of $14.00. Talk about a mixed bag!
It’s All About That Base: The Dividend Sweet Spot
First off, if you’re a dividend hound, AT&T is like catnip. At the time of writing, it boasts a mouth-watering dividend yield of around 7%. Yep, you read that right—7%. Now, just to put that into perspective:
- S&P 500 Average: The average dividend yield of S&P 500 companies hovers around 1.54%.
- 10-Year Treasury Yield: Sits at approximately 4%.
Simply put, AT&T’s dividend yield is a fire hydrant in a world of garden sprinklers. The company’s long history of consistent payouts makes it a fantastic option for investors who are in it for the long haul and love those quarterly paychecks.
Wired and Inspired: The 5G Push
When it comes to tech, AT&T isn’t gathering any moss. The company is going full steam ahead with 5G rollout. By now, you probably know that 5G is the next-gen wireless technology that promises speeds that’ll make your current internet look like it’s running on a hamster wheel.
Why should you care? Because AT&T has invested a cool $23 billion in its 5G and fiber networks in 2020 alone. And with global 5G services revenue expected to hit $414 billion by 2027, let’s just say they’ve got skin in a potentially lucrative game.
The WarnerMedia Spinoff: A Plot Twist
Ah, but life isn’t all sunshine and rainbows, right? Recently, AT&T decided to offload its media business, WarnerMedia, in a merger with Discovery. That’s like throwing a spanner in the works for anyone who bought AT&T for its media exposure.
What’s the lowdown? Well, AT&T is set to receive $43 billion in a combination of cash, debt, and WarnerMedia’s retention of certain debt. On the flip side, AT&T shareholders will get 71% of the new company. The goal? To focus like a laser on AT&T’s core telecom business.
Pros and Cons: The Nitty-Gritty
Before you jump on the AT&T bandwagon, here’s the dish on the good, the bad, and the iffy.
- Dividend Yield: It’s a cherry on top for income-focused investors.
- 5G Investments: AT&T is playing in the big leagues, folks.
- Debt Reduction: With the WarnerMedia spinoff, the company aims to pare down its hefty debt load.
- Limited Growth: The telecom sector isn’t exactly a spring chicken, so don’t expect sky-high growth.
- Complex Business: AT&T’s got a lot of moving parts, making it somewhat of a tough nut to crack for investors.
- Regulatory Challenges: The 5G spectrum ain’t the Wild West. Regulatory hurdles can be a party pooper.
- WarnerMedia Uncertainty: The jury’s still out on whether the spinoff will be a win-win.
The Elephant in the Room: Stock Volatility
The Lead Cable Fiasco
Yikes! Just when you thought it was safe to go back in the water, AT&T’s stock took a nosedive. A report in July 2023 revealed that abandoned lead-sheathed cables could pose a risk. This news sent the stock tumbling nearly 7%, hitting its lowest level in thirty years.
Adding insult to injury, analysts have been downgrading the stock left and right. It’s like watching a beloved sports team go through a losing streak; you want to look away, but you can’t.
What’s an Investor to Do?
The Bull Case
Alright, let’s not throw the baby out with the bathwater. AT&T is still a massive player in the telecom sector. They’ve got a ton of employees (160,700 to be exact) and a revenue stream that most companies would kill for. Plus, they’ve shown some growth, albeit modest, in both revenue and net income.
The Bear Case
On the flip side, the stock’s recent volatility is enough to give even the most seasoned investor heartburn. The lead cable issue is a dark cloud hanging over the company, and the analysts’ downgrades aren’t helping.
Conclusion: A Rollercoaster Worth Riding?
So, here we are at the crossroads. AT&T is a behemoth, no doubt about it. But it’s also a behemoth that’s currently navigating through some choppy waters. If you’re the risk-averse type, you might want to sit this one out. But if you’ve got a stomach for a rollercoaster ride and believe in the company’s long-term prospects, then, by all means, hop on board.
In the end, investing in AT&T could be a wild ride. But hey, isn’t that what makes the stock market so darn exciting?