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AT&T Stock: Leverage Tactical Trading For Outsized Returns (Rating Upgrade)

May 19, 2023 2:30 PM ETAT&T Inc. (T)VZ, TMUS, T.PR.A, T.PR.C, TBB, TBC32 Comments


  • We made a very controversial call to sell chunks of AT&T Inc. stock as it hit $19 and $20.
  • The stock has tanked over 17% since reporting earnings.
  • As we guided to tactically wait for well under $17 to come back into the name, we are once again ready to buy for income.
  • Cash flow is key here, but with the yield now approaching 7%, you can generate more income not just by trading the stock around a core position, but through a covered call approach.
  • Looking for more investing ideas like this one? Get them exclusively at BAD BEAT Investing. Learn More »

From Vision Through Strategy And Execution To Success


The markets are looking for direction, as they have been pinned in a range the last two months, and we just do not see meaningful upside much past 4200 on the S&P 500 Index (SP500). We think the

This article was written by

Quad 7 Capital profile picture

Quad 7 Capital is a team of 12 with a wide range of experience sharing investment opportunities for nearly 7 years. Quad 7 Capital as a whole has expertise in business, policy, economics, mathematics, game theory, and the sciences. They share both long and short trades and invest personally in the stocks they discuss within their investing group. They lead the investing group Bad Beat Investing include: daily market commentary and market briefing, 1-2 trade ideas per week, 5 chat rooms for a range of sectors, volatility screeners, unusual options activity alerts, and economic calendars.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of T 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 (32)

around $14.50 is when you want to buy
sourdo profile picture
Patience pays. I waited, for the price to come to me, snagged some at $15 yesterday, and ready to buy more.

AT&T, about as predictable as the tides. Never long long, but always good for a trade. Over and over again too.
big fat turd. long at the long term chart. trades at the same level since 1993.
Is there Part 2 to this trade? Stop Loss level maybe cuz its not working to well,?
Quad 7 Capital profile picture
@AARProved there is, but its not public. we will simply say, this is a buy, and the stop is not even close. Our members have a different trade structure. Despite that, anything under $16 is a good buy. The dividend will be paid and now you can get some growth. As prescribed this trade down a few % but, you want to be buying this weakness
Picked up $5K worth at $15.95 this morning. Add more every 20 cent drop if it goes that direction.
Marieee profile picture
Well jpmorgan have an 20 dollar pt by the end of the year for what ever that is worth… it has been a terrible investment.. hopefully…/
ajwdct247 profile picture
AT&T has not gotten proper credit/PR for its #1 ranking in fiber to the building, leadership in carrier ethernet and managed SD-WAN services. See: AT&T tops leaderboard of commercial fiber lit buildings for 7th year! techblog.comsoc.org/...
@ajwdct247 No money to speak of there. Commodity product; look at Lumen.
ajwdct247 profile picture
@San Marzano Not true-Gigapower is very different from Lumen's fiber offerings. Key to Gigapower's approach as a wholesaler is an open access model that enables local, regional and national Internet service providers (ISPs) to ride the network and market and sell broadband services to residential and business customers. Please listen to this podcast: ISPs, including cable ops, want to plug into Gigapower.www.lightreading.com/... Several markets are "locked in" with excellent ROI to follow.
ajwdct247 profile picture
I believe former AT&T CEO Randall Stephenson destroyed T stock price. With the exception of Oct 12, 2022 low, T stock has not been this low ($16.30) since Nov 1994. That means it is now lower than the lows it reached in the 2000-2003 and 2007-2009 bear markets. Analysts are missing the huge ROI the company will get from its GigaFiber joint venture with BlackRock as per techblog.comsoc.org/... (also see reader comments below the article)
@ajwdct247 The JV with BlackRock is a good move in the long term. This is outside ATT territories where they don't have existing right-of-ways so costs could be higher and take longer. I like the open access element to it, however BR said even TMUS may use it so they are enabling more fiber operators for better/worse. This isn't necessarily a slam dunk for T as it could be for BlackRock but any open access fiber network is great for consumers.

Fiber could run into profit challenges going forward in cable areas as they upgrade to multigig (up to 10gig) at only $200 per passing. Fiber costs over $1000 per passing on avg so cable will be better positioned to compete on price when they have to.
@ajwdct247 Could not disagree more.

T has a cap of $120b today. Whitacre, a guy in the technology industry allegedly, spent more kn Ameritech and Bell South than the entire company worth today.

Deal $'s represent equity used in acquisitions (assumption of debt the typical arrangement).
1997 Starting Point - SBC $40B market cap
1997 - Buys Pacific Bell $17B
1998 - Buys SNET $4B
2000 - Buys Ameritech $81B
2004 - Buys AT&T Wireless $24B (60%)
2005 - Buys AT&T $16B
2006 - Buys Bell South $67B
2015 - Buys DTV $49B
2016 - Buys Warner $85B
Total counting starting pointl - $383b
Less Warner Spin ($43B)
Net $340B
Less $134B today

$200B gone!
ajwdct247 profile picture
@user50238 That is a fair analysis. Don't think it's been revealed how AT&T and BlackRock will split the profits or losses from their Gigapower JV. Comcast has huge fiber buildout plans including a 10Gig symmetric offering but not sure if they plan to use their own backbone network or Gigapower wholesale backbone
Long T for income. Since the average market by return is about 9% if I get roughly a 7% dividend I don’t need much upside to beat the average market return. It’s all about a safe rising dividend for retirement band T can help you goal.
I am login to buy under $16..
12% upside ? wow ! And then stall or reverse. Why don't these analysts speak about the $200B in equity capital destroyed since 1997 over and above current cap on a myriad of poor deal economics and poor execution on wireless (now third) and ask why any sane person should trust the bureaucrats running that outfit. How many analyst buy recommendations have been issued since 1997 only to have their opinions be an embarrassment? Too many to count!
Slim Shady profile picture
Put selling and covered calls are mathematically the same thing.
@Slim Shady assuming the margin rate is identical
17939962 profile picture
@Slim Shady I don't know how you arrive at this conclusion Slim. If I sell a put, I'm giving someone the right to SELL me stock. If I sell a call, I'm giving someone the right to BUY stock from me!
Have T stock for longer than 8 care to admit. It’s probably the worst investment I have ever made since management is probably the worst ever to run a 150 + billion dollar company. A few years back I realized T was never going to turn any corner and started implementing a similar strategy of selling a portion of shares when the stock is as elevated a T could get, taking the tax write off a d repurchasing shares after the wash rule at a lower price. I did this last year selling at $20.29 and remarkably repurchasing at $15.98 thinking the stock could never dip below that number but here we are close to that number again. I am amazed reading the earnings transcripts where Stankey boasts about 2 million plus new post subscribers in 2022, 7.5 million fiber subscribers, and a 6 billion cost savings indicative. All this yet revenue and earnings are essentially 1-2% higher and the FCF is a constant miss. How do you manage a company with 143 billion in debt and miss the cost of a dividend that was already reduced by 45% by 50% or 1 billion. It’s inexcusable and keeps repeating itself as they misses FCF in each of the first three quarters last year until blowing it out in quarter 4 probably by some trickery. Alpha should rate this stock F -
@Jlexus1953 Total agree with your comment. To boot I think T (over the last decade plus) invested/bought over 200 Billion in other companies (Warner Brothers etc.) and then sold all at much lower prices.
Yet SA writers continue to plug it. The only way I can describe T (i.e. not using financials) is that its like the lottery ticket winner of a billion dollars who ends up going bankrupt.
@Jry295 Excellent simile.
@Jlexus1953 💔 devasting and true
Nice call! One of my favorite trading and holding stocks. Normally I keep some I closed it between 19-20 too. Added 1/4 in the 18s. Added 1/4 today. Drip while you wait!

Nah you didn’t get lucky it as obvious. Div was getting too small. Same old issues. No real catalyst to drive it up other than dumber (t mobile joke) VZ really doing bad. I occasionally buy VZ and hold it as short as possible. Long T.

Added some AVGO today our #1 in the drip on a break out. Added some more DVN sold higher. GLTA

PS: any shares I get over 7% YoC I’ll hold. My driver is VZ issues. Fun article, thx!
"There are analyses which suggest AT&T and rival Verizon Communications Inc. (VZ) may have to step up their spending even more to catch up to rival T-Mobile US, Inc. (TMUS). That could weigh. Ouch. "

Will be interesting to see how much debt this adds for both VZ and T. They either have to spend more than has been budgeted recently to match TMUS coverage or continue to lag TMUS. There are a couple reasons 5G rollout has been and will continue to be more costly for VZ and T than for TMUS.

The wider known reason is that TMUS got their spectrum very cheap with the Sprint acquisition while T and VZ had to spend about double for Cband spectrum.

However the rollout of midband spectrum also costs up to 50% more for T/VZ midband than for TMUS especially as expanding outside metro areas. The reason is because Cband (near 4Ghz) needs 3 sites for same coverage as 2 TMUS midband sites (2.5Ghz), up to 50% more cost. (Higher frequencies have less range/penetration so needs more sites to match coverage).

VZ also bought perhaps too much high band mmWave originally thinking it could be used for mobile. But the range is too poor for significant mobile coverage, now mainly used in high density areas essentially as high speed fixed hotspots.

Another problem for VZ is on their low band 5G. They decided to use DSS (dynamic spectrum sharing) for low band 5G that allows sharing 4G/5G on the same band. The problem is that 4G ignores DSS priority and so 4G can often perform faster than 5G on the low band. T and TMUS dedicated a slice of low band to 5G so don't use DSS much.

6G coming next decade... whoever plays likely has to deal with more debt, whoever doesn't play will be behind a generation.
@user50238 TMO doesn't use DSS at all anymore. 6G investment will start likely in 5-7 years and agree companies will have to spend more again, this is very bad business unless they find a way to optimize costs or somehow charge customers more. Another fact is that spectrum is ridiculously expensive.

I personally believe AT&T is already behind Verizon and TMO with 5G infrastructure, i believe company is badly managed and they have too many employees especially on management level. I would love management to start cleaning company first before investing.
@klaudia1993 On 6G, the rollouts are not expected til next decade but you are right the spectrum auctions and related spending could start sooner. Will be interesting to see which US carrier bids the most. 6G can be applied to existing 4G/5G spectrum so it's not required to acquire more spectrum but if the big carriers don't bite someone else will including maybe CableCos.

The 6G spec hasn't been finalized yet but the spectral efficiency is expected to be 2X-5X better than 5G. 5G has about 2X better spectral efficiency than 4G. That means within existing spectrum the carriers will get 2X-5X more performance/capacity on paper over 5G. DSS will be much more useful for sharing 5G/6G given both will follow priority rules, 4G does not. Though there is still overhead involved with DSS.

On current 5G rollout coverage, ATT is behind the most with midband 5G but they have close to TMUS coverage with slower performing lowband 5G. VZ has second most midband and distant 3rd in low band. VZ has the most high band 5G (mmWave) rolled out but not much range, more like hotspots.
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