| Snowflake Score | |
|---|---|
| Valuation | 5/6 |
| Future Growth | 0/6 |
| Past Performance | 4/6 |
| Financial Health | 3/6 |
| Dividends | 4/6 |
T Stock Overview
AT&T Inc. provides telecommunications, media, and technology services worldwide.
AT&T Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$18.27 |
| 52 Week High | US$28.29 |
| 52 Week Low | US$17.99 |
| Beta | 0.60 |
| 1 Month Change | -10.66% |
| 3 Month Change | -7.91% |
| 1 Year Change | -35.19% |
| 3 Year Change | -47.75% |
| 5 Year Change | -51.11% |
| Change since IPO | 12.86% |
Recent News & Updates
AT&T: Why I Remain Bullish
AT&T has seen a significant reduction in average churn over the past five years. Additionally, overall revenue continues to grow. Investors appear to have overly fixated on dividend growth while ignoring the company's organic business growth. For these reasons, I remain long AT&T. Investment Thesis: With churn rates having decreased and overall revenue increasing, the stock could be trading at a significant discount at this point. Over the past five years, investors have been largely bearish on AT&T (T), with the stock having seen a significant decline: investing.com The purpose of this article is to investigate whether there is an increasing disconnect between price and the company's overall performance, and whether we could expect to see a longer-term rebound in upside. Performance One of the most important metrics for a telecommunications company is churn - i.e. the rate at which the company sees customers ceasing to do business with them. To get a broader overview of churn performance for AT&T, I decided to average quarterly churn data for both AT&T and competitor Verizon (VZ), in order to determine whether this metric has been improving (decreasing) over time, and where AT&T stands on this metric relative to its largest competitor. The specific churn rates used were postpaid phone churn for AT&T and wireless retail postpaid phones for Verizon. The original quarterly data and SQL calculations can be found here. Here are the average yearly churn rates for AT&T and Verizon (with 2022 averaging two quarters of data): AT&T Average Churn By Year Year Churn Rate (%) 2018 0.90 2019 0.95 2020 0.79 2021 0.76 2022 0.77 Source: Average churn rate calculated by author using SQL. Verizon Average Churn By Year Year Churn Rate (%) 2018 0.76 2019 0.79 2020 0.67 2021 0.72 2022 0.76 Source: Average churn rate calculated by author using SQL. When looking at the above churn rates, we can see that while that of AT&T was higher than that of Verizon in 2018 - churn rates for the former have decreased significantly over the past five years. This is an encouraging sign as it indicates that less customers are choosing to leave AT&T, and the company is also better able to compete with Verizon in terms of customer retention. That said, when looking at ARPU (or average revenue per user) - we see that this has remained more or less consistent over the past two years, with the company reporting Postpaid Phone-Only ARPU of $54.47 in June 2020 and $54.81 in June 2022. AT&T: 2nd Quarter Earnings 2022 Although revenue has remained constant, I take the view that lower churn provides significant opportunity for the company to grow its customer base and revenue overall - with postpaid subscribers up by over 10% from June 2020 to June 2022. From a financial standpoint, we can see that the company's long-term debt has decreased by 14% from the last quarter, which is encouraging. AT&T: 2nd Quarter Earnings 2022 However, when looking at the company's quick ratio (cash less inventories all over current liabilities), we can see that this ratio has dropped sharply from December - indicating that AT&T has less cash available to meet its short-term liabilities. December 2021 June 2022 Cash and cash equivalents 19223 4018 Inventories 3325 3241 Total current liabilities 106230 47989 Quick ratio 14.97% 1.62% Source: Figures sourced from AT&T 2nd Quarter Earnings 2022. Quick ratio calculated by author. Looking Forward With AT&T having significantly reduced churn rates and showing a reduction in long-term debt, investors have nonetheless seemed coy of this stock.
AT&T: Dirt Cheap And Recession-Proof
AT&T's stock plunged after an unimpressive second quarter. However, the company's headline numbers were robust, and its free cash flow issues are probably transitory. AT&T is essentially recession-proof and should benefit from multiple expansion. AT&T (T) stock recently dropped by about 10% after the company reported its Q2 results. Despite better-than-expected EPS and revenues, enthusiasm was dampened by cash flow concerns. After the recent plunge, AT&T's stock is yielding about 7.3%. Moreover, at around 7.4 times forward EPS estimates, AT&T is dirt cheap again. The market may be overreacting, as the recent earnings report was robust, and the cash flow dip is probably a transitory phenomenon. Additionally, the company has outlined a detailed strategy on how it plans to expand over the next several years. Furthermore, AT&T is essentially recession-proof and could benefit from a management shakeup. AT&T's downside appears very limited, and the stock is compelling here. Multiple expansion and other variables could enable AT&T's stock price to appreciate considerably from here while providing a substantial dividend simultaneously. AT&T's Earnings Stumble AT&T reported non-GAAP EPS of $0.65, beating consensus estimates by $0.03. Revenue of $29.6 billion was also a beat by $130 million. The company posted over 800,000 postpaid phone net adds and more than 300,000 AT&T Fiber net adds in the quarter. While AT&T increased its mobility service revenue guidance to 4.5-5%, it also decreased its free cash flow guidance to the $14 billion range. AT&T's headline numbers are substantial, but the cash flow reduction is disappointing. Heavy investments in 5G and working capital needs are impacting cashflows. However, inflation is probably a factor, and as the economy moves past the difficult phase, AT&T's cash flow issues could resolve quickly. Highlights (investors.att.com) If we look closely, AT&T's numbers were relatively robust. Standalone company revenues came in at $29.6 billion, 2% higher than the $26 billion in the same quarter one year ago. Adjusted EBITDA also grew $175 million or 1.7% YoY. Standalone adjusted EPS increased by 1 cent to 65 cents in the last quarter. Perhaps most importantly, AT&T's core Wireless Service grew by 4.6% YoY and is projected to continue growing similarly throughout 2022 and 2023. Also, we see some FCF notes that imply the decrease in FCF is a temporary phenomenon. While AT&T's results remain solid, and AT&T has shown a tenacity for surpassing consensus analysts' forecasts in recent quarters, it has not prevented the stock from performing terribly against its competition. AT&T Hasn't Done Well Against The Competition Data by YCharts AT&T's stock has performed terribly, down by roughly 33% over the last five years. Verizon (VZ), AT&T's closest competitor, is up slightly over the same time frame. Comcast (CMCSA) is also higher, and T-Mobile US (TMUS) has crushed the competition over the last five years. It's essentially the same if we drag the chart out further, as AT&T's is down by around one-third over the previous ten years. So, you're getting the dividend, but the share price continues to drip lower. We saw a disastrous takeover of Time Warner. AT&T likely overpaid for the media giant, but worse, it mismanaged the merger horribly. Five years later, AT&T spun off WarnerMedia for far less than it had paid to acquire the company. Moreover, AT&T still has a boat load of debt and faces a costly build-out of its 5G network. Where is the innovation? Where is the growth? Where is the higher stock price? AT&T has a great brand and significant potential. The stock is dirt cheap, but where is anything growth-related or even constructive? Time For A Management Change How long will shareholders wait for a real management shakeup? AT&T's management hasn't done anything productive with the company for many years. AT&T's stock has been worse than dead money for decades and trades at the same price it was back in 1995, nearly 28 years ago. AT&T has become incredibly inefficient and is essentially a bureaucracy that needs to change quickly. AT&T needs a new sheriff to establish order and return the company to growth and increasing profitability.
Hold On To AT&T Stock
Although AT&T has not performed well historically during times of low consumer confidence, year-to-date, the stock has significantly outperformed the broader market. Using the Gordon Growth Model, T appears to be fairly valued. However, based on the justified P/E ratio calculation, the stock may have some further upside potential. AT&T has a long track record of safe and sustainable dividend payments. We currently rate the stock as "hold". The broader market has seen a substantial decline since the beginning of the year due to several macroeconomic headwinds, including rising interest rates, high inflation, elevated commodity prices, supply chain disruptions, COVID-19 related restrictions, increasing geopolitical tension in the Eastern European region and a declining consumer confidence in the United States. Some firms, however, have remained relatively unaffected by these macroeconomic challenges, and one of them is AT&T (T). Data by YCharts While the broader market has declined by as much as 17% year-to-date, AT&T’s share price is up by about 12%. In this article, first we will be evaluating how T is expected to perform in the current market environment, based on its historic stock price performance during time periods characterized by low consumer confidence. Then, we will also establish a range of fair values for T’s stock using the Gordon Growth Model and identify a range of justifiable price to earnings ratios. Performance during periods of low consumer confidence Consumer confidence is a leading economic indicator, which is often used to predict near term changes in the spending behavior of the consumer. A low or declining consumer confidence is an indication that people are not sure about their financial outlook and therefore are likely to start reducing their spending and start increasing their savings. Such a behavior is expected to have a more pronounced impact on firm’s that manufacture and sell durable, discretionary, non-essential goods. Services may also be impacted, as people are likely to start reducing costs by choosing lower cost alternatives. Consumer confidence in the United States had already seen a sharp drop in 2020, when the pandemic started, however in 2022 the decline has continued. The current U.S. consumer confidence is even lower than the levels observed during the 2008-2009 financial crisis. Although consumer spending has remained strong in the first half of 2022, we believe that the low confidence is eventually going to result in slowing spending. U.S. Consumer confidence (Tradingeconomics.com) Let us now take a look at how AT&T has actually performed during times of low consumer confidence in the last 20 years. Our periods of interest are marked by the red circles. 2001-2003 In this period, T underperformed the S&P500 by about 10%, losing more than 43% of its market value in this two year period. Data by YCharts 2007-2010 Between 2007 and 2010, the firm performed in line with the broader market during the entire period. Both the SPY and T declined by about 21% in this three year time frame. Data by YCharts 2011-2013 In this time period, both the broader market and AT&T closed in the positive territory. And once again the firm performed in line with the broader market. Data by YCharts Although past performance is not always indicative of future performance, we expect that based on these three time periods, AT&T’s stock may not be a safe haven during periods, characterized by low consumer confidence levels. In our opinion, the Integrated Telecommunication Services industry is in general very competitive. The pricing power of the firms is limited and the switching cost between providers is relatively low. For these reasons, we believe that the stock’s outperformance may continue in the short term, but are not likely to be sustainable in the longer run. Let us take a look now at the firm from a valuation point of view. To value the firm, we will be using the Gordon Growth Model. Valuation Gordon Growth Model The Gordon Growth Model is a simple dividend discount model, which can be applied to determine the fair value of equity of dividend paying stock. For the Gordon Growth Model to be applicable, the firm should fulfill a set of criteria: The company pays a dividend Stable dividend growth is expected at a constant rate in perpetuity The firm is relatively unaffected by the business cycle fluctuations Also a plus, if a firm has a strong track record of steadily increasing dividend payments. AT&T has been paying a safe and sustainable dividend for the last 38 years, and even increasing the payout in most of the years. The current annual dividend is $1.11 per share. We believe that it is a suitable candidate to be valued by using this dividend discount model. Dividend history (Seekingalpha.com) The following formula describes the mathematics behind the GGM. Gordon Growth Model (wallstreetprep.com) In order to determine a fair value, we have to make two assumptions: What is our required rate of return? For the required rate of return, we usually like to use the weighted average cost of capital ('WACC') of the firm. The WACC of AT&T is in the range of 7% to 8.3%. WACC (Finbox.com) To stay relatively conservative in our analysis, we will be using a required rate of return from the higher end of this spectrum, 8%. 2. What is a reasonable assumption for the stable and constant dividend growth rate in perpetuity? The following table summarizes the dividend growth rate for several different periods. In our opinion, these figures may not be the most representative because of the recent dividend cut in 2021. Dividend growth (Seekingalpha.com) Between 2010 and 2020, the dividend has increased by an average of about 2%, we will be using it as our most likely case. However, to account for uncertainty, we will conduct our analysis using a range of 1% to 3%. Results (Author) As the stock is currently trading around, $21 per share, it is in the upper end of our fair value range. Although T may be fairly valued, based on this measure, the stock is not likely to offer significant upside potential. Let us see, what the justified P/E ratio of the stock could be. Justified price-to-earnings ratio Price multiples are often given little weight, as many claim that it is a backward looking measure. However, using the Gordon Growth Model, present value calculations could be combined with the P/E ratio, resulting in the so-called justified P/E.
Shareholder Returns
| T | US Telecom | US Market | |
|---|---|---|---|
| 7D | -0.4% | 0.4% | 1.3% |
| 1Y | -35.2% | -25.8% | -11.7% |
Return vs Industry: T underperformed the US Telecom industry which returned -25.8% over the past year.
Return vs Market: T underperformed the US Market which returned -11.7% over the past year.
Price Volatility
| T volatility | |
|---|---|
| T Average Weekly Movement | 3.8% |
| Telecom Industry Average Movement | 7.4% |
| Market Average Movement | 7.8% |
| 10% most volatile stocks in US Market | 16.9% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: T is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.
Volatility Over Time: T's weekly volatility (4%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1983 | 203,000 | John Stankey | https://www.att.com |
AT&T Inc. provides telecommunications, media, and technology services worldwide. Its Communications segment offers wireless voice and data communications services; and sells handsets, wireless data cards, wireless computing devices, and carrying cases and hands-free devices through its own company-owned stores, agents, and third-party retail stores. It also provides data, voice, security, cloud solutions, outsourcing, and managed and professional services, as well as customer premises equipment for multinational corporations, small and mid-sized businesses, governmental, and wholesale customers.
AT&T Fundamentals Summary
| T fundamental statistics | |
|---|---|
| Market Cap | US$130.19b |
| Earnings (TTM) | US$16.19b |
| Revenue (TTM) | US$156.60b |
8.0x
P/E Ratio0.8x
P/S RatioIs T overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| T income statement (TTM) | |
|---|---|
| Revenue | US$156.60b |
| Cost of Revenue | US$72.13b |
| Gross Profit | US$84.47b |
| Other Expenses | US$68.28b |
| Earnings | US$16.19b |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 2.27 |
| Gross Margin | 53.94% |
| Net Profit Margin | 10.34% |
| Debt/Equity Ratio | 102.3% |
How did T perform over the long term?
See historical performance and comparisonDividends
6.1%
Current Dividend Yield71%
Payout RatioValuation
Is T undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
5/6Valuation Score 5/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast
Key Valuation Metric
Which metric is best to use when looking at relative valuation for T?
Other financial metrics that can be useful for relative valuation.
| What is T's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$130.19b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 2x |
| Enterprise Value/EBITDA | 5.8x |
| PEG Ratio | 4.5x |
Price to Earnings Ratio vs Peers
How does T's PE Ratio compare to its peers?
| T PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 42.6x | ||
VZ Verizon Communications | 9.1x | 4.8% | US$189.6b |
FYBR Frontier Communications Parent | 13.8x | -61.5% | US$6.7b |
IHS IHS Holding | 133.1x | 43.7% | US$2.8b |
IDT IDT | 14.4x | n/a | US$700.1m |
T AT&T | 8x | 1.8% | US$130.2b |
Price-To-Earnings vs Peers: T is good value based on its Price-To-Earnings Ratio (8x) compared to the peer average (42.6x).
Price to Earnings Ratio vs Industry
How does T's PE Ratio compare vs other companies in the Global Telecom Industry?
Price-To-Earnings vs Industry: T is good value based on its Price-To-Earnings Ratio (8x) compared to the US Telecom industry average (12.6x)
Price to Earnings Ratio vs Fair Ratio
What is T's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 8x |
| Fair PE Ratio | 11.8x |
Price-To-Earnings vs Fair Ratio: T is good value based on its Price-To-Earnings Ratio (8x) compared to the estimated Fair Price-To-Earnings Ratio (11.8x).
Share Price vs Fair Value
What is the Fair Price of T when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: T ($18.27) is trading below our estimate of fair value ($88.55)
Significantly Below Fair Value: T is trading below fair value by more than 20%.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is more than 20% higher than the current share price, but analysts are not within a statistically confident range of agreement.
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Future Growth
How is AT&T forecast to perform in the next 1 to 3 years based on estimates from 24 analysts?
Future Growth Score
0/6Future Growth Score 0/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
1.8%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: T's forecast earnings growth (1.8% per year) is below the savings rate (1.9%).
Earnings vs Market: T's earnings (1.8% per year) are forecast to grow slower than the US market (14.4% per year).
High Growth Earnings: T's earnings are forecast to grow, but not significantly.
Revenue vs Market: T's revenue is expected to decline over the next 3 years (-0.5% per year).
High Growth Revenue: T's revenue is forecast to decline over the next 3 years (-0.5% per year).
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: T's Return on Equity is forecast to be low in 3 years time (12.5%).
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Past Performance
How has AT&T performed over the past 5 years?
Past Performance Score
4/6Past Performance Score 4/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
-21.8%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: T has high quality earnings.
Growing Profit Margin: T's current net profit margins (10.3%) are higher than last year (1%).
Past Earnings Growth Analysis
Earnings Trend: T's earnings have declined by 21.8% per year over the past 5 years.
Accelerating Growth: T's earnings growth over the past year (926.4%) exceeds its 5-year average (-21.8% per year).
Earnings vs Industry: T earnings growth over the past year (926.4%) exceeded the Telecom industry -34.4%.
Return on Equity
High ROE: T's Return on Equity (13.2%) is considered low.
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Financial Health
How is AT&T's financial position?
Financial Health Score
3/6Financial Health Score 3/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: T's short term assets ($34.5B) do not cover its short term liabilities ($49.2B).
Long Term Liabilities: T's short term assets ($34.5B) do not cover its long term liabilities ($241.9B).
Debt to Equity History and Analysis
Debt Level: T's net debt to equity ratio (99.3%) is considered high.
Reducing Debt: T's debt to equity ratio has reduced from 116.4% to 102.3% over the past 5 years.
Debt Coverage: T's debt is well covered by operating cash flow (23.7%).
Interest Coverage: T's interest payments on its debt are well covered by EBIT (5x coverage).
Balance Sheet
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Dividend
What is AT&T current dividend yield, its reliability and sustainability?
Dividend Score
4/6Dividend Score 4/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
6.08%
Current Dividend Yield
Dividend Yield vs Market
Notable Dividend: T's dividend (6.08%) is higher than the bottom 25% of dividend payers in the US market (1.49%).
High Dividend: T's dividend (6.08%) is in the top 25% of dividend payers in the US market (4%)
Stability and Growth of Payments
Stable Dividend: T's dividend payments have been volatile in the past 10 years.
Growing Dividend: T's dividend payments have fallen over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: With its reasonable payout ratio (70.7%), T's dividend payments are covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its reasonable cash payout ratio (55.2%), T's dividend payments are covered by cash flows.
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Management
How experienced are the management team and are they aligned to shareholders interests?
6.6yrs
Average management tenure
CEO
John Stankey (59 yo)
2.08yrs
Tenure
US$24,820,879
Compensation
Mr. John T. Stankey has been Chief Executive Officer of AT&T Inc. since July 1, 2020 and as its Director since June 1, 2020. He has been President of AT&T Inc. He served as President and Chief Operating Of...
CEO Compensation Analysis
Compensation vs Market: John's total compensation ($USD24.82M) is above average for companies of similar size in the US market ($USD12.88M).
Compensation vs Earnings: John's compensation has been consistent with company performance over the past year.
Leadership Team
Experienced Management: T's management team is seasoned and experienced (6.6 years average tenure).
Board Members
Experienced Board: T's board of directors are considered experienced (8 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
Ownership Breakdown
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
Top Shareholders
Company Information
AT&T Inc.'s employee growth, exchange listings and data sources
Key Information
- Name: AT&T Inc.
- Ticker: T
- Exchange: NYSE
- Founded: 1983
- Industry: Integrated Telecommunication Services
- Sector: Telecom
- Implied Market Cap: US$130.190b
- Shares outstanding: 7.13b
- Website: https://www.att.com
Number of Employees
Location
- AT&T Inc.
- 208 South Akard Street
- Dallas
- Texas
- 75202
- United States
Listings
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/08/12 00:00 |
| End of Day Share Price | 2022/08/12 00:00 |
| Earnings | 2022/06/30 |
| Annual Earnings | 2021/12/31 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.