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AT&T: The Bottom Is In

Jan. 03, 2022 8:15 AM ETAT&T Inc. (T)98 Comments
Graham Grieder profile picture
Graham Grieder


  • AT&T has had a tough 2021 but produced fairly decent numbers. 2022 should yield even better results and the stock should see a price increase over the next year.
  • AT&T will see a dividend cut due to the spin-off and investors can expect to see a 5-6% yield, which is still fairly strong.
  • I believe the bottom is in for AT&T, bring on $30 and beyond.

AT&T To Acquire Bellsouth For $67 Billion

Toby Jorrin/Getty Images News

AT&T (NYSE:T), like most of the global population, has had better years. The stock closed the year down about 16% and touched levels not seen since 2009. The good news is that I believe the bottom is in and

This article was written by

Graham Grieder profile picture
A finance graduate from the University of Alberta. I have developed a trend-following strategy backed by solid fundamentals. Removing emotion from the situation is the hardest, yet most important lesson to learn.-"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffett

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

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Comments (98)

Code Talker Market Analysis profile picture
Look at the price of $T and $WBD and tell me the bottom was in when you called it.
SPEND your money. Write a WILL profile picture
Superb article.

Long and strong $T

Where are the "haters" btw?

Prof Ed Re profile picture
@be smart, write a WILL Well you asked, Here's one. Very very poor management. Stay away. No long-term plan.
SPEND your money. Write a WILL profile picture
@Prof Ed Re

>>. No long-term plan.
If I may ask, how would you know that?

Would you happen to know what $VZ and $TMUS' long term plans are?
Prof Ed Re profile picture
@be smart, write a WILL Great Question. Without having inside information all we can do is look at the record of the three companies. All wonderful dividends and big companies. So the question is, where do they differ? Answer, past performance. If we're talking long-term let's talk about 5 years, 10 years, 15 years & 20 years. VZ up on the 5 yr, up on the 10 yr, up on the 15 yr and up on the 20 yr. Let's talk TMUS up ,up,up & up. Now let's talk T down, down, down and down. Tell me what am I missing? I'm open minded.
T touched it's 200 dma today at $26.81 then spent the day drifting back down to close not even 1% above it's open. It needs to bust above $28 to be considered "back". I own T. I don't see it. My heirs will someday figure out what to do with this thing.
@InvestorMan Sr. The reason it drifted back down at the end of the day today was that traders got spooked by the abrupt drop in the markets in the late afternoon (e.g. DOW was up almost the entire day, SPY was only slightly down, and then boom the bottom fell out). News outlets claimed that the drop in the market was due to the Fed releasing its minutes from the December meeting pointing out the tentative rate hikes in March.

Potential rate hikes in March, however, is NOT new news.? That was announced in mid-December. I'm thinking that the people that hit the lottery with the growth stocks the last year and a half are finally cashing in on their winnings (while hedge funds are contemporaneously shorting). Regardless, it is looking like the smart money is coming back to value plays fom the more risky growth side of the market. T will see $28 this quarter, I'm literally betting 6 figures on it anyway because that is what my ape brain is telling me makes sense given T's financials vis-a-vis its comps and the market as a whole. Regardless, good luck to you and your children who inherit your T shares. Hopefully, it works out for all of us in the long run. Time will tell.
@Bloom Investments
Many holders in the $27.50 range for more than to 2 years just want out before the div cut expect selling there as they clear out.
@RUBYRUBY3 ? T nearly hit $33 a share within the last 180 days.? Within the last couple of years it’s been near $40 a share and above 30 several times.?
NotARetiree profile picture
Happy to see the T rebound rocket.
I lost count of how many times this title has been used for T over the past several years.
@braticus agree
I wanted to buy in at $23, if for no other reason than a REIT like dividend without all the dividend cuts. But I just keep hearing about unimpressive, uninspired management. Is that a fair assessment or are the critics being overly vitriolic? On the other hand, VIAC is not doing much better and has a lower dividend yield. Different businesses to be sure, but playing for the same bank accounts.
Booban profile picture
@PrettyInGreen If you base your decisions on what you read here on SA, you will lose money, both articles and comments. Remember, both view points can be true, from their point of view. I believe T management to be crap, but everything has a bottom. There was a time when McDonalds was completely dissed on SA but I bought. Because I believed a big enough company has time to right the ship. I am now up 235% on McDonalds.
It's a firm not in touch with information technology change. The Robert's boys at Comcast certainly got it so it's not like someone in the same industry couldn't find value in the changes occurring.

Looking backward, when the CEO of 15-20 years ago didn't even use a computer how could he have a vision that Yellow Pages could be Google and Blockbuster could be Netflixs? Brain dead monopolists.
@San Marzano
In the 90s I talked to guy in the business who said they were so stuck in the past copper wire and switchgear that optical fiber was something they just could not get their heads around. They would lay optic like old copper and then when multiplexing came along they and they saw 1000X the capacity the fear was how do you price the calls with this volume suddenly available. Sure was not how do we introduce new ideas to take advantage of it.
He also said copper was subsidized all over the country but calls were priced like they paid for it. It will be long forgotten when they roll up all that copper that the taxpayer laid it down.
nerd_rage profile picture
@San Marzano The real question now is, what's the disrupted industry of the future? The Yellow Pages and Blockbuster disruptions are history but the real value is if we have to actually invest in the right disrupter.

Sports is a good area to watch. Sports has to migrate to streaming somehow, but what form does that take? A big obstacle is greedy leagues keeping prices too high. How does that get solved?

Maybe gambling as an additional revenue stream? Maybe traditional sports are superseded by novel ones that Netflix or HBO Max could invent and own? A bit like the way games are invented and owned by gaming companies, except in this case, they are spectator sports (traditional video games have also garnered a big following as spectators sports).

That may sound pretty radical but the path of disrupters is never obvious so think radical.

Another area that's yet to take shape on streaming: news. What does a global news streaming service look like? It won't be cut & pasted from cable and broadcast. I doubt CNN+ has the vision to be that disrupter, at least not right away.
Elk Tart profile picture
Long Long Long. "Fool me twice, shame on me," but I'm betting the management will stay on track this time, and do a serviceable job.
Best case here is a swing trade and a couple quarters of income. T is no longer a stock to hold forever. It is poorly run and there are no compelling catalysts in place. Seems like dead money and a forced position, as there are too many other options. Why bother?
I just bought 500 more shares. Bought to clase out 10 puts .
Watching Ford today and thinking back to when I sold at $13 with a small gain and listened to those who said they were "dead money" and could not adapt ... Long T and INTC.
@HoopMac Same - sold at $15 thinking it wasn't getting any better than that.. Here we are tho. Lomg as $T pays a div, and everyone is on a cellphone. im in it.
All the naysayers here at $25 remind me of the folks on XOM last year in the upper $30s, claiming that the it was obvious XOM was going out of business. It is now in the $60s.

The combined value should be in the $30-$40 range now; I fully expect it to hit that range, probably prior to WBD.

I get that people are unhappy with what management has done with a lot of the profits, but the thing is... the company is as profitable as ever. It's a profit generating monster and if anything, its market position has improved.

Also, I was noting migration patterns within the U.S. and it seems as though in the past year - back of the envelope here - a good three quarters of a million people have left Verizon home territory and moved to T home territory.
@andrewilliamson XOM was my stock of the year in 2021. I scooped as many shares as I could in bewilderment in the upper 30s and lower 40s and road them to my price target for year-end of $60, which it hit about 8 months early. I then switched to BP because I felt it was cheap relative to the comps. Now that Big Oil is priced more fairly, I was looking for something undervalued and had been keeping my eye on AT&T. When it dropped to $26.80 in the 4th quarter of 2021, I began buying blocks all the way down to the $22s thinking how wildly cheap T was getting. Then I saw a bunch of 10,000 call option blocks fire-off a few Wednesdays ago, and the next morning T announced its dividend and Morgan Stanley finally spoke up on how ridiculously over-sold T had become (likely having pulled the trigger on the options plays the day prior) and the price is finally starting to correct. But I agree, there is a lot more growth in market-cap before T becomes fairly priced.

In my mind, if WBD is extracted, the remaining assets of T should trade around the same market cap level as Verizon, perhaps with a slight discount due to the DirectTV debacle. T's market cap with WBD included right now, however, is somehow 41.5 billion less than VZ.

Like you, I fully expect that before the WBD spin-off and/or split-off, we should see T's share price climb into the 30s/40s. Because logic would suggest that T's market cap should surpass VZ's market cap by close to the value of T shareholders' 71% stake in WBD. That said, for whatever reason, thus far Mr. Market is adjusting the price of T slower than I would anticipate (e.g. DISCA was up 5.8% today and VZ was up 2%, yet T only finished up .8%).

Something I have noticed about T, however, which was also occurring with XOM when I was riding it up last year (which also appears to happen with most stocks), is that institutional players that are able to block trade based on the closing price likely attempt to manipulate the price during trading hours so as to maximize their profits from the block trade. For instance, if I am a trader at Goldman and I know that I get to buy 20million shares of T from another institution today based on T's closing price today, then it makes sense for me to sell 10million shares in the last 30minutes of trading so that I drive the price down and get the 20million shares cheaper than on the open market. Granted, the institution selling to Goldman may be buying shares in the last 30 minutes to avoid such a scenario.
Steve Moore profile picture
Let’s set aside all the long-term baggage here- there is PLENTY to go around. I don’t want a shouting match with someone still losing money after 15-20 years.

I want to focus instead on the Reverse Morris Trust transaction and how that tax free strategy will likely pan out for those doing a quick flip of the shares to make a quick buck without doing anything long-term.

If someone buys 99 or fewer shares, will they be prorated or be assured that all will be accepted and converted immediately to the new stock and be allowed to be sold?

An example of one of these from Summer, 2016 was when defense company Lockheed Martin (LMT) had a deal involving Leidos (LDOS).

I told about 70-75 friends at work about it. Almost everyone bought 10-99 shares each of LMT (around $256ish a share). When all was said and done (about a month or so), my friends got Leidos stock, sold it right away and pocketed over $500k in profits.

Many still thank me today for helping to find the deal.

Not to brag, but this was a TREMENDOUS deal and there have been others as well. Some have been Reverse Morris Trust deals. Others have been odd lot tender offers where those with 99 shares are assured that if they tender all their shares, ALL WILL BE TAKEN. In other words, they won’t be prorated and have, say, 80-90% of shares returned to them.

This is a rare situation where the little guy has an advantage over large shareholders, something extremely unusual.

I’m trying to basically do the same thing here. Anyone care to help dissect this one?
Again? How many bottoms can one company have?
@GrowthandValu Best response I have see all year.
Booban profile picture
@GrowthandValu Bottom is already over. This is the top of the bottom. Wait for the bottom of the bottom next.
StevenK1 profile picture
@GrowthandValu bottoms up.
"We're in the early innings of transforming the Company and believe that we have significant opportunity ahead of us"

You mean the first 5 transitions did not work???
Woof! worst managed company in America. They will cut the dividend.
04 Jan. 2022
can anyone tell me? how many T shares will be after the spin-off.
@ASRU If it is a pure spin-off without an exchange offer (a.k.a. split-off), then the share count will remain the same (~7.1billion) and all T shareholders will get a pro-rata distribution of WBD stock. On the other hand, if WBD is entirely split-off, then T's outstanding shares will likely fall by about 1.4 to 1.5 billion, which would leave T with ~5.6billion shares. It is also possible that it is a hybrid of the two. For instance, if T shareholders are offered the option to exchange their T shares for WBD shares, and there aren't enough takers for all the WBD shares (let's say that 50% of WBD shares are voluntarily acquired via exchange, then the other 50% of WBD would be allocated to T shareholders proportionately. In such an instance, T shares would fall by ~750 million instead of ~1.5 billion, and the other 50% of WBD would be treated like a dividend payment, only instead of receiving taxable cash, T shareholders would be getting non-taxed WBD shares.
@Bloom Investments in the exchange would 1 share of t receive 3-4 shares of wbd? i would like to understand if this is correct. please respond.
Stinky seems to be doing the right things, for now anyway. Just afraid that once they've spun off whatever they can and have a better debt profile they don't start looking for new things to buy...
stumpy58 profile picture
26-27 is serious resistance.
Well, just remember, the fact that a portion of the debt will be transferred is only helpful if it's paid off. If not, then I would assume the standard would be that ATT would again be liable for the debt as the original 'borrower'.
@steve1189 - That raises some interesting balance sheet questions around the issue of "contingent liabilities".
@steve1189 T wont own any part of Warner's debt after the spinoff. Not that Warner wont be able to pay its bills. Do you even realize that Warner had debt before T bought it?
@steve1189 No issue at all.
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