After slipping into the dreaded "bad stock" category, AT&T (T) has been engaged in a seemingly uphill battle to reclaim its lost glory. This telecommunications behemoth is surrounded by a string of controversies and an unending soap opera, so to speak. Resting on a market cap of $182 billion, it greatly overshadows close competitors like Sprint Nextel (S) and Verizon (VZ), and is a tough opponent for mobile phone makers such as Research in Motion (RIMM) and Apple (AAPL). These companies individual strengths pose a great threat to AT&T. This is reflected in key indicators such as the quarterly revenue growth - where Verizon's 7.7% doubles AT&T's 3.6%.
There are a lot of factors that hinder AT&T's performance. If it is not the legal battles, it is the mounting competition from other industry titans. In order to gain insight on the future direction of AT&T, I am compelled to delve through the recent adversities and find out if there is some light at the end of the tunnel for this key player.
"Bad stock" would be an extreme term to use for a stock that once exhibited a stellar performance in the market. According to consumerist.com, AT&T is one of the prominent names that have failed to satisfy the diverging interests and ambitions of different investors.
Blessings from a Bad Stock
As much as this news is a disappointment to AT&T shareholders, I am sure the management team still has it in them to overcome these untimely adversities. This is based on their previous track record.
The fact that the company has managed to maintain a positive consistent quarterly revenue growth over the years speaks volumes about the determination and proficiency in AT&T's management. Being a long-term investor of a bullish inclination, resilience and endurance are key factors that I constantly shadow. AT&T exhibits these two characteristics, a top reason why I recommend buying its stock.
As of right now, things are ugly, and they could get a whole lot worse if competitors like Verizon capitalize on the moment. With that said, the market occasionally displays erratic behavior. There is a likelihood that risk seeking investors will lean towards AT&T. Most prolific investors are attracted to risks as they occasionally reap standout results. Amid all these possibilities, there is one looming factor or effect for that matter-increase in demand. If demand increases, then share value usually increases in a similar fashion.
Indirect benefits from Viper Launch?
Smartphone fanatics are placed at the edges of their seats with the much anticipated release of the LG viper that will operate on the highly coveted 4G network. Sprint, one of AT&T's primary competitors, is one of the brains behind this smartphone. This will be a major breakthrough for Sprint, as negative net income of $2.8 billion is a big eyesore. Despite the negatives, I believe that this news will have a profound impact on AT&T's stock. On the one hand, it could attract positive attention to AT&T. Conversely, it could be a major blow, as short term investors may cross borders to Sprint.
I believe this news could ironically benefit AT&T. The market will shift its attention from the unending drama in AT&T and place accents on Sprint. This will avail an opportunity for AT&T to push the dirt under the carpet, so to speak. In the stock market, getting the much needed edge ultimately boils down to strategy, and I believe that a wounded AT&T has some tactical maneuvers up its sleeve. If this real possibility materializes, I foresee heightened confidence levels in AT&T shareholders and future investors. If AT&T manages to pull such a move, it will act as proof of its resilience and flexibility.
To call net neutrality principles infamous and unpopular is an understatement. After consumer proponents failed to pass these scorned rules in court, FCC and congress, they have shifted their exclamation to corporate governance. The spongy idea that data packets should be treated in a similar fashion attracts a lot of unnecessary adversities. Titans like Verizon, Sprint and AT&T are all caught up in this ongoing battle.
Now is the best chance for AT&T to increase its share value. If it focuses on waging a frantic battle against these principles, I am confident that it will attract a lot of attention from long-term investors. Such a move would instantly create positive sentiment for AT&T. The industry big wig will pass out as aggressive and defensive.
Even the US government has rallied against AT&T. In a recent lawsuit, the government alleges that AT&T has resorted to fraudulent schemes. It suggests that an insecure AT&T purposely adopted a flimsy registration system that accommodated non-American applicants.
Personally, I believe these negative issues are just a phase for AT&T - a passing cloud. The infinite potential in AT&T cannot be overlooked, and its stock is bound to see better days.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.