One of the most well-known wireless phone providers in the United States is AT&T Inc (NYSE:T). When stock markets become erratic, the telecom and media giant can be seen as a haven and make a solid defensive move. In a setting of relatively low-interest rates, AT&T also keeps its strong 6.6% annualized dividend yield. Are investors advised to buy AT&T stock?
Since the stock market is currently in a correction, now is not the best moment to buy stocks, but choosing the best candidates for your watchlist is still crucial. Investors should look for stocks in leading industry groups that outperform the market when the market resumes a verified uptrend.
Technical Analysis of AT&T Inc
The second half of 2021 was also tricky for AT&T stock. Shares sought to break out from a flat foundation early in the year with a 31.99 buy point. The breakout was unsuccessful when the percentage gapped below the 50-day line in high volume in late May. The price of AT&T’s stock then dropped even lower than its 200-day moving average.
Investors’ extremely negative response to the presentation of the second quarter’s earnings resulted in a gap down in high volume. The company reported on July 21, which caused the shares to drop by almost 8% that day. A significant downside is that the most recent earnings announcement dropped shares below their 50-day and 200-day lines. Investors should preferably look for stocks trading above their moving average support levels.
After this sell-off, the stock will need to undergo maintenance; ideally, a new base and purchase point will be rebuilt before it is ready for action. Amid the most recent collapse on July 21, the stock’s relative strength line has also significantly retreated.
The relative Strength Rating for AT&T stock is currently 38, below the required minimum of 80 for portfolio contenders. S&P 500 is the benchmark for calculating the RS line for a stock. When a stock breaks out, an RS line should ideally be at or close to a new high.
WarnerMedia and Discovery Merger: AT&T Stock
AT&T Inc (NYSE:T) Inc and WarnerMedia have agreed to combine their businesses in May 2021. In a merger that might finalize during the second quarter, the wireless service provider intended to connect its WarnerMedia division with Discovery.
Warner Bros. Discovery, which will trade as WBD stock, will result from the merger of the WarnerMedia group and Discovery. Early in the second quarter, trading for Warner Bros. Discovery is predicted to begin. AT&T stockholders will own 71% of the new firm and 29% of Discovery shareholders.
The new company will compete with Walt Disney (DIS), Netflix (NFLX), and other streaming media providers by offering HBO Max, Discovery+, and CNN+. However, it will also feature numerous traditional pay-TV channels and production facilities. HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, TNT, TBS, Eurosport, Magnolia, TLC, and Animal Planet are just a few of the names mentioned.
AT&T Revenue
AT&T Inc (NYSE:T) Inc reported second-quarter revenue of $29.64 billion, exceeding expectations for $29.45 billion. Even yet, the income was down 17% from the prior year. Additionally, the company’s bottom line exceeded forecasts with EPS of 65 cents per share. However, there was an 11% reduction from the previous year, which isn’t great.
Furthermore, due to the WarnerMedia split, AT&T reduced its annual dividend by 46% to $1.11 per share. A 6% dividend yield is still pretty high in the current market, and AT&T offers one.
According to Raymond James analyst Frank Louthan, “Management did not commit to any dividend-specific actions moving ahead, particularly deferring to the board on any future dividend growth, which we believe is the most crucial piece.” “We hold out hope for a small dividend rise, and share buybacks are also possible. Before the year ends, we anticipate more clarification on this.”
AT&T’s Q2 earnings were a significant factor in the stock’s decline because the firm revised its forecast for free cash flow for the entire year. From a $16 billion range, AT&T reduced its full-year free cash flow projection to a range of $14 billion.
According to the business, Q2’s free cash flow from continuing operations was $1.4 billion despite more significant capital expenditures. That fell short of the $4.62 billion in FCF consensus projection.
In addition, AT&T reported a gain of 813,000 postpaid wireless phone users versus projections of 562,000. In contrast to expectations of $19.7 billion, AT&T’s wireless service revenue increased 5.2% to $19.9 billion.
Should I buy AT&T stock?
Given that the stock has recently crossed below significant moving averages and needs repair work before a new buy target is accessible, AT&T Inc (NYSE:T) should not be purchased at this time. Investors also want to prioritize stocks that have recently had earnings and sales growth of at least 25%. T stock is currently far lower than that.
Despite offering a dividend yield of 6.6%, AT&T stock is not now an excellent addition to your portfolio. Investors will need to wait till the fundamentals of the stock improve. Investors can browse IBD stock lists and other IBD information to locate the finest stocks to buy or watch.
Featured Image: Megapixl © F11
Author Valerie Remorosa