T Stock Overview
AT&T Inc. provides telecommunications, media, and technology services worldwide.
Price History & Performance
|Historical stock prices|
|Current Share Price||US$16.01|
|52 Week High||US$27.74|
|52 Week Low||US$15.85|
|1 Month Change||-11.11%|
|3 Month Change||-23.73%|
|1 Year Change||-40.99%|
|3 Year Change||-57.23%|
|5 Year Change||-59.13%|
|Change since IPO||-1.10%|
Recent News & Updates
Better Dividend Pick: AT&T Vs. Verizon
Summary AT&T lowered its FY 2022 free cash flow forecast by $2.0B to $14B in the last quarter. Even with a lower baseline free cash flow estimate, the expected dividend remains solidly covered. I will compare AT&T and Verizon based on top line growth, expected free cash flow payout ratio, valuation and yield. AT&T (T) and Verizon (VZ) are not only competing for customers in their operating segments, but they are also competing for investors who obviously have the choice to buy either one of the companies’ shares. AT&T and Verizon both pay shareholders attractive dividends and distribute a significant portion of their free cash flow annually. However, with AT&T recently lowering its free cash flow outlook by $2.0B and separating itself from its content business, I believe it is a good idea to compare the telecommunications firm to Verizon and see which company offers shareholders the better deal. I believe both companies are attractive for dividend investors, but one company has an advantage over the other! T data by YCharts AT&T vs. Verizon: which is the better dividend stock for investors? Weak top line growth A stock’s dividend is obviously just one factor that matters to investors. Other factors such as valuation, free cash flow payout ratio and the safety of the dividend also matter and must be taken into account before deciding which dividend stock offers the best potential. The first point I would like to make relates to prospects for top line growth for both AT&T and Verizon. Both telecoms face saturated market conditions in their core businesses, but they do see some momentum in their broadband segments. AT&T had 316 thousand net-adds in its fiber business in Q2’22 while Verizon had 268 thousand broadband net-adds in the second-quarter. While the broadband business shows some promise for both companies due to accelerating customer adoption, both AT&T and Verizon won’t see a whole lot of top line growth going forward. AT&T is projected to see a 2% revenue drop next year while Verizon is only expected to see a 1% revenue increase year over year. Free cash flow potential and payout ratio AT&T cut its free cash flow (“FCF”) guidance from $16B to $14B as customers are increasingly under pressure from high inflation and delay paying their bills. AT&T’s free cash flow in Q2’22 was $1.4B which was not sufficient to pay its quarterly dividend bill which runs at approximately $2.0B. Based on AT&T’s current free cash flow outlook for FY 2022, the telecom has an expected FCF payout ratio of 57% in FY 2022… assuming there is no change to the dividend or the FCF forecast in Q3 or Q4. Verizon has not given a free cash flow forecast for FY 2022, but I recently estimated that the telecom could achieve $17-19B in free cash flow this year. In Q2’22, Verizon’s free cash flow was $6.2B which covered the dividend payment of $2.7B easily. Based off of a low-case estimate of $17B in free cash flow in FY 2022 and assuming no change in the dividend rate, Verizon is set to pay out 63% of its estimated free cash flow this year. AT&T is therefore faring slightly better than Verizon regarding free cash flow payout. FCF valuation Based off of $14B in free cash flow for AT&T and $18B (midpoint) in free cash flow for Verizon, AT&T has a P-FCF ratio of 8.5 X while Verizon has a P-FCF ratio of 9.6 X. T Market Cap data by YCharts Earnings valuation AT&T and Verizon are both attractively valued based off of free cash flow, but the former has a slight advantage. Both stocks are also cheap based off of earnings, with AT&T having a slight advantage as well. AT&T is expected to generate EPS of $2.52 in FY 2023 while Verizon is expected to have an EPS of $5.28 in that same year. The drop in AT&T's EPS this year is related to the spin-off of Warner Bros. Based off of forward earnings, AT&T has a slightly lower P-E ratio (6.6 X) than Verizon (7.8 X). AT&T FY 2022 FY 2023 FY 2024 Verizon FY 2022 FY 2023 FY 2024 EPS $2.54 $2.52 $2.58 EPS $5.18 $5.28 $5.38 YoY Growth -25.39% -0.66% 2.46% YoY Growth -3.94% 1.93% 1.94% P-E Ratio 6.60 X 6.64 X 6.48 X P-E Ratio 7.97 X 7.82 X 7.67 X
Debt & the Telecom Giants: Why Spreading the Risk May be Important in an Economic Decline
AT&T Inc. (NYSE:T), T-Mobile US (NYSE:TMUS), and Verizon (NYSE:VZ) are the three key telecom operators in the US. The stocks had lackluster performance, with TMUS delivering 6.8% in the last 12 months, T experiencing a deep drop of 38.4% and VZ losing some 23.3%. In this article we will discuss the effects of debt, 5G and consumer spending on the valuations of these stocks as well as see how their fundamentals compare.
The AT&T Absurdity: Yield Higher Than PE
Summary Extreme negative market sentiment has brought AT&T to an absurd position: its FY PE is 6.7x while its TTM dividend yield stands at 7.87%. There are undoubtedly headwinds and restructuring uncertainties ahead as the company streamlines its operation post the WarnerMedia spinoff. However, long-term investors should take note of its growth and recovery potential. These shares are projected to deliver double-digit annual returns in the next 5 years even under my conservative estimates. Thesis Market sentiment occasionally creates absurd situations, especially at its greed or fear extreme. AT&T (NYSE:T) is currently at the fear extreme, and its FY PE of 6.7x is so compressed that it is lower than its TTM dividend yield of 7.87 percent as you can see from the following chart. To broaden the viewpoint a bit more, let's compare it against its closest peer Verizon (VZ). As seen, its current TTM dividend yield of 7.87% is also above its 4-year average yield of 6.91% by 100 basis points (or almost 14% in relative terms), and above its peer VZ's 6.06% by a whopping 181 bps (or almost 30% in relative terms). In terms of valuation metrics, its FY PE of 6.71x is discounted by 24% compared to VZ's 8.16x PE. Admittedly, T is more leveraged than VZ and its PE should be discounted, and a leverage-adjusted valuation metric may be more meaningful. Except that, as you can see below, once such an adjustment is made, the valuation gap becomes even wider, not narrower. Its EV/EBITDA ratio is at a 32% discount from VZ. And finally, in terms of the price-to-cash flow ratio, it's only trading at 3.2x times its cash flow. Of course, there are some good reasons behind such seemingly absurd numbers, which we will elaborate immediately below. However, the overall thesis of this article is that these reasons are overblown, and the severe mispricing of T creates an investment opportunity for outsized potential returns. Source: author based on Seeking Alpha data. Operation Challenges Undoubtedly, there are headwinds and restructuring uncertainties ahead as the company streamlines its operation post the WarnerMedia spinoff. My estimate is that the divestiture of Warner Media would shave about $45 billion from its top line for the full year of 2022. Furthermore, Warner's revenue growth potential is better than the other business segments retained in T. As a result, the divestiture will very likely also slow down T's revenues going forward. Even in the immediate near terms, there are strong headwinds with the overall slowdown of the economy and also the renormalization of post-pandemic consumer spending. The chart below shows such a slowdown clearly. As seen from the top panel (which shows the inventory on a quarterly basis), the inventory is within its historical average. Its current inventory stands at $3.24B, essentially on par with the average of $3.25B in the past few quarters. However, in terms of the days of inventory outstanding on a quarterly basis (shown in the bottom panel), the picture is completely different. Its inventory currently stands at 23.6 days, completely off the chart compared to the 15 to 17 days a few quarters ago. It is expensive to maintain a large inventory, especially considering the heavy CAPEX requirements that its needs to build out its 5G and fiber capabilities. Next, we will see if the potential reward can properly compensate for such risks. Source: Seeking Alpha data. Projected growth and return potentials The above risks are capsulated in the following projection of slow growth and also the large variance in the consensus forecasts. As seen, the consensus forecasts imply an annual growth rate of only 0.9% CAGR in the next few years. The variance between the optimistic and pessimistic forecasts is quite large too: more than a factor of 1.26x for 2025 ($2.27 EPS vs $2.87 EPS). In terms of annual rate, the low-end forecasts predict a contraction of EPS between 2022 and 2025 (from an EPS of $2.38 to $2.27). Source: author based on Seeking Alpha data. However, my view is that the above projections are too pessimistic. My analysis of its ROCE (return on capital employed) is about 30% as detailed in my earlier articles. In terms of reinvestment, it is planning $24B in CAPEX Investment in the next few years (2022 and 2023 at least) and then gradually taper down from there. Assuming an aggregated average of 10% reinvestment rate, the organic growth rate would be 3% (organic growth rate = ROCE * reinvestment rate = 30% * 10%). Given the long-term pricing power that T has demonstrated, adding 1% or 2% of inflation escalation would easily bring the growth rate to the mid-single-digit range (say 4% to 5%). In my mind, such a growth rate is on the conservative side for a few reasons. First, I expect the margins to be higher now than prior to the Warner divestiture. My analysis shows that a 250 basis points margin expansion is feasible going forward. The lower interest expense alone, thanks to the lower debt after the spinoff, will contribute to a margin improvement by about 115 bps. Second, the company is in the process of expanding its 5G network and also its fiber network. The spinoff and the lower debt also enable AT&T to better focus on its 5G and fiber ramp-up. Once the main infrastructure is laid out, the cost will remain approximately fixed and profitability accelerates. As just mentioned, my projection is that capital expenditures will increase first, and then gradually begin to taper down starting ~2024. The valuation compression is so extreme that even a moderate growth could deliver large returns. As aforementioned, T is substantially undervalued in both absolute and relative terms. Even compared to its own historical track record, the valuation discount is about 14% in terms of dividend yield and 41% in terms of price-to-cash flow ratio. With such a compressed valuation, a healthy projected return can be expected even assuming a conservative growth rate of 4%. As shown, for the next 3~5 years, the total return is projected to be in a range of 33% (the low-end projection) to about 99% (the high-end projection), translating into an annual return of 7.4%to 18.8%. A highly asymmetric opportunity in my view even after adjusting for the above-mentioned risks and its relatively weaker financial strength (B+ compared to A+ from VZ).
|T||US Telecom||US Market|
Return vs Industry: T underperformed the US Telecom industry which returned -33.1% over the past year.
Return vs Market: T underperformed the US Market which returned -21.6% over the past year.
|T Average Weekly Movement||3.2%|
|Telecom Industry Average Movement||6.2%|
|Market Average Movement||6.9%|
|10% most volatile stocks in US Market||15.9%|
|10% least volatile stocks in US Market||2.8%|
Stable Share Price: T is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.
Volatility Over Time: T's weekly volatility (3%) has been stable over the past year.
About the Company
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|
Is T overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|T income statement (TTM)|
|Cost of Revenue||US$72.13b|
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
Oct 20, 2022
|Earnings per share (EPS)||2.27|
|Net Profit Margin||10.34%|
How did T perform over the long term?See historical performance and comparison
6.9%Current Dividend Yield
Is T undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation 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
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?|
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|
VZ Verizon Communications
FYBR Frontier Communications Parent
TMUS T-Mobile US
Price-To-Earnings vs Peers: T is good value based on its Price-To-Earnings Ratio (7x) compared to the peer average (32.2x).
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 (7x) compared to the Global Telecom industry average (16.2x)
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.
|Current PE Ratio||7x|
|Fair PE Ratio||11.9x|
Price-To-Earnings vs Fair Ratio: T is good value based on its Price-To-Earnings Ratio (7x) compared to the estimated Fair Price-To-Earnings Ratio (11.9x).
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 ($16.01) is trading below our estimate of fair value ($87.85)
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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How is AT&T forecast to perform in the next 1 to 3 years based on estimates from 25 analysts?
Future Growth Score0/6
Future Growth Score 0/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
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 (14.7% 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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How has AT&T performed over the past 5 years?
Past Performance Score4/6
Past Performance Score 4/6
Growing Profit Margin
Earnings vs Industry
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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How is AT&T's financial position?
Financial Health Score3/6
Financial Health Score 3/6
Short Term Liabilities
Long Term Liabilities
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 ($241.9B).
Debt to Equity History and Analysis
Debt Level: T's net debt to equity ratio (99.3%) is considered high.
Reducing Debt: T's debt to equity ratio has reduced from 116.4% to 102.3% over the past 5 years.
Debt Coverage: T's debt is well covered by operating cash flow (23.7%).
Interest Coverage: T's interest payments on its debt are well covered by EBIT (5x coverage).
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What is AT&T current dividend yield, its reliability and sustainability?
Dividend Score 4/6
Cash Flow Coverage
Current Dividend Yield
Dividend Yield vs Market
Notable Dividend: T's dividend (6.93%) is higher than the bottom 25% of dividend payers in the US market (1.62%).
High Dividend: T's dividend (6.93%) is in the top 25% of dividend payers in the US market (4.45%)
Stability and Growth of Payments
Stable Dividend: T's dividend payments have been volatile in the past 10 years.
Growing Dividend: T's dividend payments have fallen over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: With its reasonable payout ratio (70.7%), T's dividend payments are covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its reasonable cash payout ratio (55.2%), T's dividend payments are covered by cash flows.
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How experienced are the management team and are they aligned to shareholders interests?
Average management tenure
John Stankey (59 yo)
Mr. John T. Stankey has been Chief Executive Officer of AT&T Inc. since July 1, 2020 and as its Director since June 1, 2020. He has been President of AT&T Inc. He served as President and Chief Operating Of...
CEO Compensation Analysis
Compensation vs Market: John's total compensation ($USD24.82M) is above average for companies of similar size in the US market ($USD13.05M).
Compensation vs Earnings: John's compensation has been consistent with company performance over the past year.
Experienced Management: T's management team is seasoned and experienced (6.7 years average tenure).
Experienced Board: T's board of directors are considered experienced (8 years average tenure).
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
|08 Nov 21||BuyUS$2,504,000||Stephen Luczo||Individual||100,000||US$25.04|
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
|Ownership||Name||Shares||Current Value||Change %||Portfolio %|
AT&T Inc.'s employee growth, exchange listings and data sources
- Name: AT&T Inc.
- Ticker: T
- Exchange: NYSE
- Founded: 1983
- Industry: Integrated Telecommunication Services
- Sector: Telecom
- Implied Market Cap: US$114.086b
- Shares outstanding: 7.13b
- Website: https://www.att.com
Number of Employees
- AT&T Inc.
- 208 South Akard Street
- United States
|Ticker||Exchange||Primary Security||Security Type||Country||Currency||Listed on|
|T||NYSE (New York Stock Exchange)||Yes||Common Shares||US||USD||Nov 1983|
|T *||BMV (Bolsa Mexicana de Valores)||Yes||Common Shares||MX||MXN||Nov 1983|
|SOBA||XTRA (XETRA Trading Platform)||Yes||Common Shares||DE||EUR||Nov 1983|
|SOBA||DB (Deutsche Boerse AG)||Yes||Common Shares||DE||EUR||Nov 1983|
|T||SWX (SIX Swiss Exchange)||Yes||Common Shares||CH||CHF||Nov 1983|
|T||SNSE (Santiago Stock Exchange)||Yes||Common Shares||CL||USD||Nov 1983|
|T||ETLX (Eurotlx)||Yes||Common Shares||IT||EUR||Nov 1983|
|T||BVL (Bolsa de Valores de Lima)||Yes||Common Shares||PE||USD||Nov 1983|
|ATT||WBAG (Wiener Boerse AG)||Yes||Common Shares||AT||EUR||Nov 1983|
|SOBA||BUL (Bulgaria Stock Exchange)||Yes||Common Shares||BG||EUR||Nov 1983|
|T_KZ||KAS (Kazakhstan Stock Exchange)||Yes||Common Shares||KZ||USD||Nov 1983|
|T||BASE (Buenos Aires Stock Exchange)||CEDEAR EACH 3 REP 1 USD1 (USD)||AR||ARS||Sep 2000|
|TD||BASE (Buenos Aires Stock Exchange)||CEDEAR EACH 3 REP 1 USD1 (USD)||AR||USD||Sep 2000|
|ATTB34||BOVESPA (Bolsa de Valores de Sao Paulo)||BDR EACH 3 REPR 1 COM SHS||BR||BRL||Dec 2011|
|T.PRA||NYSE (New York Stock Exchange)||5% DEP RP PFD A||US||USD||Dec 2019|
|T.PRC||NYSE (New York Stock Exchange)||4.7 DP SHS PFD C||US||USD||Feb 2020|
|T WD||NYSE (New York Stock Exchange)||COM||US||USD||Apr 2022|
Company Analysis and Financial Data Status
|Data||Last Updated (UTC time)|
|Company Analysis||2022/09/23 00:00|
|End of Day Share Price||2022/09/23 00:00|
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.