AT&T (T) has had a tough ride as of late. No longer the sole supplier of the vaunted iPhone and facing fierce competition from Verizon (VZ) and a resurgent Sprint (S), AT&T's stock closed Wednesday at $35.33 which is $9.4% off its 52 week high of $39 set in April.
Is this pullback a buying opportunity or a value trap?
Many in the analyst community seem to think AT&T might be a good bet right now, with 9 analysts giving it a strong buy or buy rating and only 3 giving it an under perform or sell rating. A full 24 analysts are taking the wait and see approach with a hold.
The mean price target is $37.70 with a high price target of $42.00 and a low of $31.00
Keep in mind that AT&T does pay a dividend 0f $1.80 yielding a hefty 5.2% at today's price.
AT&T is currently in the Elevated Risk State according to both the aggressive and conservative SmartStops risk signals. Based on the Conservative Risk Signals, AT&T has experienced 2 periods of elevated risk this year, entering the elevated risk state both times after approaching $39 per share. During the first period of elevated risk, AT&T hit a high of $38.58 on September 21st before pulling back and hitting a low of $32.71 on November 9th for a 15% pull back over a six week period. We may be seeing a similar patter this time around and the low $30's could prove to be a good entry point.
source: SmartStops.net
Some of today's opportunities for AT&T include:
- Rapid global growth of mobile device adoption providing mobile access to data including smart phones and tablets.
- Reduced power of device manufacturers leading to a reduction of carrier hardware subsidies.
- Growth of mobile data downloads in part driven by social media adoption and picture and video sharing.
Some of today's challenges for AT&T include:
- Reinvigorated competition from Sprint which just completed a merger deal with Softbank who is prepared to inject $5 Billion dollars to upgrade the Sprint network to 4G speeds.
- Capital investment needed to upgrade AT&T's wireless network and stay competitive
- The move toward unlocked smart phones increases carrier competition and can lead to price wars and lower margins.
In Summation
With its attractive dividend yield and the bright future of mobile computing and communication, AT&T may prove to be a great investment in the low $30's. However, it may be prudent to wait until strength is seen and its risk state returns to normal.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.