It certainly was not a summer to remember for AT&T Inc. (NYSE:T), with an embarrassing drop in AT&T stock value coupled with a great deal of indifference from analysts and a few unfortunate headlines. But is this telecom giant showing signs of fraying, or will T stock regain its heat as the calendar moves into chillier months?
Summer Doldrums for T Stock
As a company that has raised its dividends every year for the past 32 years, it is hard to imagine AT&T stock beset with woes. But since July, T stock has lost 7.7% of its value, and this comes despite having a 4.8% dividend yield.
Analysts trying to predict the future for AT&T stock have not exactly been—to borrow a line from Alan Greenspan—irrationally exuberant. On August 29, 24 analysts weighed in on a price target, with the bullish forecasters setting T stock at $48.00 while the bearish estimates were down to $35.00 over the next year. On September 15, the bullish analysts kept their $48.00 forecast high while the bears sank theirs to $26.00. (Source: “Analysts Concerns on: AT&T Inc. (NYSE:T),” Post Registrar, September 20, 2016.)
AT&T has experienced some recent public embarrassments.
After the public interest group National Digital Inclusion Alliance started a media campaign highlighting how the AT&T refused to follow federal mandates and provide discounted broadband service to many low-income neighborhoods, the company initially balked at changing its service offerings. AT&T later did an abrupt about-face on its offerings to the nation’s poorest communities. (Source: “AT&T to change policy of charging poor customers more for super-slow internet,” CNN, September 9, 2016.)
The company also kicked off the first full day of autumn with unpleasant news: the Federal Communications Commission (FCC) announced that AT&T agreed to a $450,000 fine to settle charges of unauthorized operations of fixed wireless stations. AT&T accepted the fine with the insistence that the matter merely involved “minor discrepancies. That is a rather curious statement, considering that the FCC had been investigating the company since January 2015 and had concluded that AT&T had operated point-to-point microwave stations throughout the U.S. at variance with its licenses over a four-year period. (Source: “AT&T agrees to pay $450,000 to settle U.S. probe,” Reuters, September 23, 2016.)
T Stock Still Plugged In
But analyst skepticism and hiccups of bad press have hardly made a dent in AT&T’s operations. If anything, the company is still on track to expand its presence as a U.S. telecom giant.
Most notably, the company’s acquisition of DirecTV (NASDAQ:DTV), in a $49.0-billion transaction completed in July 2015, is bringing a new degree of excitement and attention to AT&T stock. CEO Randall Stephenson, speaking last week at the Goldman Sachs Group Inc (NYSE:GS) Communacopia conference, previewed the streaming service “DirecTV Now” which is being positioned to offer more than 100 channels at a “very, very aggressive price point” that is lower than traditional TV service. (Source: “AT&T to Challenge Netflix, HBO With DirecTV Now,” PC Magazine, September 22, 2016.)
Taking aim at the likes of Netflix, Inc. (NASDAQ:NFLX), “HBO Now” and “Amazon Video,” Stephenson promised stellar programming that would emanate from “some win-win arrangements with the content providers.”
AT&T has also recently debuted “Project AirGig,” a technology to deliver multi-gigabit-per-second wireless Internet speeds over power lines. AirGig, which is being tested in what the company defined as “select cities and countries,” is an uncommonly bold telecommunications step, considering the evaporating enthusiasm that many industry experts have regarding broadband-over-power-line services. (Source: “AT&T Touts AirGig, Wireless Broadband Over Power Lines,” Investor’s Business Daily, September 20, 2016.)
While DirectTV and Project AirGig take precedence, AT&T is also quietly winding down its “U-verse” brand for TV, telephony, and Internet packages. The decision could not come at a better time, especially on the television side as the company lost 391,000 fiber-based U-verse TV subscribers in the second quarter of this year. AT&T is quickly working to move U-verse customers to DirecTV, which will help free up bandwidth on its fiber-optic network. (Source: AT&T (T) to Phase Out U-verse Brand, Upgrade Plans,” Zacks, September 21, 2016.)
The Takeaway Regarding AT&T Stock
Yes, the last few months were not AT&T’s best, but the skepticism by analysts on T stock’s viability is more than a little puzzling when one considers the company’s history and current activity. As the company’s DirecTV investment starts to show a substantial return, it is not difficult to imagine that AT&T will reinvent itself as a major force in the entertainment industry while maintaining its leadership role in the U.S. telecom market. In short time, even finicky analysts will likely look beyond the company’s weak summer and offer more support for AT&T stock.