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AT&T: The Knife Is Still Falling

May 18, 2023 3:08 AM ETAT&T Inc. (T)37 Comments


  • I have been a long-term bull on AT&T till about a month ago (and wrote an article to downgrade it in April).
  • This article provides an updated assessment of the stock given its large price correction (about 17%) since my last article.
  • My conclusion is that I, unfortunately, still see more downside risks than upside risks, despite the price correction.
  • It’s OK to play with a knife. Just don’t try to catch it while it’s still falling.
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Falling stationery knives with yellow and black plastic handle on blue background with copy space for your text



I have been a long-term bull on AT&T (NYSE:T) and have been arguing for a bull thesis on SA since early 2022 (when its prices were in the ~$16 range). And of course, it is pleasant to see its robust price

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This article was written by

Sensor Unlimited profile picture

Sensor Unlimited is an economist by training with a PhD, with a focus on financial economics. She is a quantitative modeler and for the past decade she has been covering the mortgage market, commercial market, and the banking industry. She writes about asset allocation and ETFs, particularly those related to the overall market, bonds, banking and financial sectors, and housing markets.

Sensor Unlimited contributes to the investing group Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of VZ either through stock ownership, options, or other derivatives. 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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Comments (37)

Code Talker Market Analysis profile picture
$T will continue down as the recession impacts a broader population while coupled with inflation-- remember, wage inflation never really compensated for inflation, now people will be losing their jobs.

$T will short-term dive on any concerns related to the debt ceiling.

Aside from that, there's not much chance for $T to increase in share price until management successfully defends their year-end FCF estimates, which the recession will likely impair.
Inventories shrinking doesn’t equal to the sky is falling to me. It seems perfectly normal to me that a carrier would inflate inventory over the summer/fall and then see it drop over Christmas and going into January-April. After all, stock up for the busiest season (October-December) let inventories fall for the lightest sales months (January-March/April).
With an over 6% dividend yield even the low .9% price improvement case makes some sense to go long. That said, I'll see if $T dips another buck to a 14-15 level like last November before buying. Lots of bulls in every thread, should still be room for further downside.

Board and executives both are stupidly overcompensated, especially seeing as they're running a much smaller company now.
The one thing T needs is a change of leadership in Washington. The country needs pro growth policies.
Given annual FCF please explain why the dividend is at risk.
My analysis: Verizon expects $17 bn FCFE, AT&T expects $16 bn FCFE. T net debt is 135 bn, VZ is 151 bn. EV is 252 and 301 for T and VZ. FCFE yield is 13.6% for T and 11.3% for VZ. FCFF yield is 8% for T and 6.5% for VZ. Given current levels of mktcap, net debt, expected FCFE, and assuming similar growth rates, T is "cheaper" than VZ. Both can keep falling if FCFE expectations aren't met and if refinancing costs increase a lot.
What happened to all that free market capitalism leading to cheap solutions?


Capitalism seems to only work on paper in the US. Very unlikely places have cheaper data.
Yeah, what we need here are more government subsidy programs to fix all the problems caused by rampant free market capitalism. Word!
@ding dong Well, looking at that article, number 1 is Israel, which has roughly 1/500th the land mass but 1/33rd the population. More land = more towers = more expense to build a network. Less population means fewer people to spread the cost amongst. I’m sure there are exceptions in that list, but without running the numbers on each individual country, that seems to hold true.

If we go beyond that though, you’d also have to take into account population density (China isn’t going to build out the latest networks to the most rural areas, where as, for the most part, at least one of the US carriers has for the last couple generations). You’d also have to take into account the ability for consumers to pay, to some extent. You’re likely to get better margins (and service) in countries where consumers can afford to pay more than poor countries where consumers cannot afford to pay as much.
" More land = more towers = more expense to build a network. Less population means fewer people to spread the cost amongst. I’m sure there are exceptions in that list, but without running the numbers on each individual country, that seems to hold true."

No this is not true. The blue votes are VERY concentrated. And the red votes are spread out over a large land mass. Build the towers in only the blue voting regions. In the red voting regions they hate socialism so they will be willing to fork out more for the service to be brought to them.

So data needs to be a lot less costly in the metros (blue voting) and a lot more costly in the rural areas (red voting.) Right now the idiots that hate socialism are the biggest beneficiaries of socialism.
The largest beneficiary is still the top clown RANDAL STEVENSON that got T into this mess in the first place.
@Splicerman don’t let the board escape their responsibility and their union.
Looks like the current CEO has lost the trust of investors. Buffet has often spoken about the importance of management integrity and competence when investing. In the case of T it seems management has proven to have neither integrity or competence. It will likely require a change at the top to get this stock moving again.
Throwing Ketchup profile picture
Another article posted on SA this morning calls it a buy. Black or Red?
boolanger profile picture
>> ...still see more downside risks than upside risks. <<
How do I evaluate upside risk?
FredStewart profile picture
There's got to be other, more interesting stocks to discuss than T, someone at SA seems to write about it every day.
ChristopherSmith profile picture
It’s a hold and like the dividend and aren’t expecting much growth.
I continue to add to a sizable position in $T and reinvest the dividend every quarter. I believe $T moving into fiber optics along with satellite endeavors, makes $T a stock to reconsider and own at these levels.
@deadhead213 I hope your right. T is probably the most written about stock on SA. Over the past decade plus its gone from the $40's to now under $20. The only statement I can now make is T is like the person that one the Billion Dollar lottery and is now seeking financial assistance.
@Jry295 I own $MSFT from 30.00, $aapl from 55, $cvs from 35.00, $t will bounce back. I’m not worried
@deadhead213 T is partnered with SAT for US gap coverage by leasing spectrum but not investing and still should be considered speculative. T has a good strategy to invest heavily in fiber but profits are threatened with growing costs and CableCos upgrading to multigig at 1/5th the cost. Cable will be better positioned to compete on price, threatening fiber profits. Consumers win, not necessarily telcom investors.
hugh74jones profile picture
An excellent comprehensive and objective analysis. Reading T articles can confuse the newcomer, as there seem to be as many favorable ones as negative. I am one of the 1000s who has held a large T position for years ----and with considerable discouragement. I agree with a Hold recommendation, but Not to accumulate on weakness until there is some better favorable T news.
pcprincipal profile picture
A long term bull on AT&T. You must be a Browns fan.
Every day the widely held stocks have a constant drip of articles pro and con. The bottom line is the phone business used to be what was called a public utility. There is a long history of evolution since the good old days as this once not for profit business morphed into Big Business. They broke up into baby bells only to one by one go belly up and reunite.

The pattern I am seeing is profits come from new technology and selling it for as much as you can for as long as you can until everyone has it and then there is no more fruit on the vine.

In the current iteration we are at the end of a 5 year cycle implementing 5g and trying to figure out how to best monetize it into profits. The problem is the government opted to not give away bandwidth to the new technology. They opted in stead to sell it to the highest bidder which drove the price beyond profitability.

As billionaire Elon Musk is currently littering the skies with space junk the phone as we know it may soon be obsolete. There will still be trillions of users of the old product which become like hard wired phones are today. A maintenance business with no growth options other than price increases. As we are seeing during the current high inflation period there is only so much price increase that the public will be able to absorb before they begin cutting things out of their life. A roof over ones head will come before a phone in ones pocket.

I agree with this article that now is not the time to grab for more of this falling knife. However, the price fluctuations are still good enough to allow the use of options trading to make up for the no growth. Be careful to time your options so that you don't miss a dividend check if they get executed.
Paper_stax profile picture
@sdavid04191 kinda too late to sell calls
@Paper_stax It's never too late to sell calls. You have the option of price and length of time. Just pick one you are comfortable with and time it for when the stock price is off it's high. It's not making any huge up or down moves in the near future. Just be careful to not let someone steal your dividend.
5G is allowing these players to sell broadband wireless service, just one of the new iOT money earning network connections of the future.
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