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AT&T: Dropping A Loser

Mar. 03, 2021 1:00 PM ETAT&T Inc. (T), T.PA, T.PC, TBB, TBCVZ191 Comments


  • Video sub losses have weighed on the company for several years.
  • DirecTV was just a bad investment at a high price.
  • Cutting some fat is good because spectrum bids are weighing.
  • Streaming and WarnerMedia are bright spots and the future.
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We continue to be of the opinion that AT&T (NYSE:T) stock will mostly move sideways this year. This comes despite some recent buzz surrounding a renewed investment from Elliott Management.

The bottom line here is that there is ongoing pressure on revenue streams, earnings power, and the balance sheet. As we now know, following speculation for weeks and weeks, the bid amounts from AT&T on spectrum costs are in. More on this in a moment. We have covered many earnings reports for the company, and often document the ongoing decline in video subscribers. Our opinion is DirecTV was overpaid for, and underperformed. But there are bright spots in WarnerMedia, and in the future with streaming. We think you can hold for the dividend, which still yields over 7%, and as we have documented, remains well covered. Perhaps the best news we have seen in some time, AT&T is finally cutting the fat and dropping a loser.

Dropping a loser

It is kind of sad to know that AT&T spent $49 billion to acquire what ended up being somewhat of a dud. Sure, revenues came in, but they continued to wither year after year. The company and the stock largely suffered. But now AT&T has finally seen the light and is spinning off DirecTV to private-equity firm TPG Capital. There are opinions on all side of this, but we love the fact that the company is going to take $8 billion in proceeds from the deal and direct it toward debt relief. It will need it, after lots and lots of effort to cut debt, it is still sizable. As we will see, the spectrum access costs will be high. Something had to be done. Just like in trading stocks, sometimes, when you make a bad investment, you have to cut losses.

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Analyst’s Disclosure: I am/we are long T. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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