T stock: AT&T Stock Will Not Go Back To Its Pre-Covid High

 Jan. 20, 2021

Here is the article. 

My notes:

1. T stock has underperformed the market - low-decibel launch of HBO Max
2. Warner Media - ongoing pandemic 
3. 5G - competition from Verizon and T-Mobile technology expansion
4. 10% higher from its current level - 10% - stock price

We believe AT&T stock (NYSE: T) may be a decent opportunity at the present time. AT&T trades at $29 currently and is, in fact, down 25% from the level of $39 seen in the beginning of 2020. It traded at $38 in February 2020 – just before the coronavirus pandemic hit the world – and is currently 24% below that level as well. This is after AT&T stock gained 9% from its March 2020 low of less than $27. The stock has underperformed the market over recent months because of a low-decibel launch of HBO Max, along with the recent acquisition of Warner Media not likely to add much to the top line in 2020 due to the ongoing pandemic hitting the movie and advertising revenues for media giants. Also, it faces intense competition from Verizon and T-Mobile in the 5G technology expansion. But the gradual opening up of the economy is expected to lead to recovery in consumer spending in the coming quarters, while HBO Max is also expected to gradually increase its subscriber base, albeit at a slower pace. This could drive the stock 10% higher from its current level, but a full recovery to the pre-Covid level looks unlikely any time soon. Our conclusion is based on our comparative analysis of AT&T stock performance during the current financial crisis with that during the 2008 recession in our interactive dashboard.

My notes:

1. revenue 163 -> 181 billion from 2016 to 2019
2. 2.10 -> 1.90 in 2019 - EPS - margins declined
3. debt from 123 -> 158 from 2016 to 2019

AT&T Fundamentals Over Recent Years

AT&T revenues increased from $163.3 billion in 2016 to $181.2 billion in 2019, due to increase in post-paid connections. Despite higher revenues, margins declined slightly over recent years with EPS decreasing from $2.10 in 2016 to $1.90 in 2019. However, the company’s Q3 revenues saw a 5% y-o-y decline due to a drop in the voice as well as broadband connections during the current crisis. Last twelve months revenue stands at $172.9 billion, lower than the FY2019 revenue level. Earnings came in at $0.76/share in Q3 2020 as against $0.94/share in the year-ago period, mainly due to lower revenue, along with higher equipment cost and depreciation. Last twelve months’ earnings stand at $1.52 per share.

Does AT&T Have Sufficient Cash Cushion To Meet Its Obligations Through The Coronavirus Crisis?

AT&T’s total debt increased from $123.5 billion in 2016 to $158.9 billion at the end of Q3 2020, while its total cash went up from $5.8 billion to $9.8 billion over the same period. AT&T generated healthy cash from operation of $45 billion in the last twelve months. The company has enough liquidity cushion to weather the current crisis.