AT&T (T) is one of the most recognizable wireless phone carriers in the U.S. The telecom and media conglomerate can be viewed as a safe haven when stock markets turn volatile. AT&T also maintains a high 5.8% annualized dividend yield amid relatively low interest rates. Should investors consider buying AT&T stock?
Currently, the stock market is in an uptrend, signaling that it’s time to increase your exposure. Investors should be aiming for a stock position of around 60% to 80%, and should seek out leading stocks in leading industry groups that are outperforming the market and nearing buy points.
AT&T Stock Analysis
AT&T stock had a rough 2022 until the last quarter, when shares formed the right side of a large cup base. Thanks to a powerful earnings report on Oct. 20, shares were off to the races and looking strong. The stock also reclaimed key moving averages like the 50-day and 200-day lines.
In mid-December, shares started forming a handle with a buy point at 19.62. On Jan. 6, AT&T broke out above that buy point but has since undercut the entry. Still, shares remain near the buy point. The stock has undercut support at its 21-day line but remains above the 50-day line.
AT&T stock has a Relative Strength Rating of 61, which is below the minimum of 80 for portfolio contenders. Meanwhile, it’s Composite Rating of 48 is also weak. The stock’s EPS Rating, which factors into the Composite, also sits at a low 61, hindering the stock’s overall strength.
The relative strength line is sloping downward. The RS line measures a stock’s performance vs. the S&P 500. Ideally, an RS line should be at or near a new high when a stock breaks out.
In December, it was announced that AT&T and BlackRock (BLK), the world’s largest asset manager, agreed to form a joint venture that will expand fiber-optic network and broadband services outside the telecom company’s current wireline footprint.
The joint venture, known as Gigapower, will sell wholesale fiber services to internet service providers and other businesses. Gigapower will expand fiber-optic network services outside of AT&T’s traditional 21-state wireline service footprint.
AT&T still plans to expand its own fiber-optic network to 30 million-plus homes and businesses by the end of 2025. At the end of the September quarter, it had 18.5 million.
AT&T was expected to report fourth-quarter revenue of $31.4 billion but handily beat views, showing revenue of $40.96 billion on Jan. 25. Revenue rose 1% on a year-over-year basis, its first revenue growth in at least seven quarters.
Meanwhile, the company missed bottom-line expectations with earnings per share of 56 cents. Earnings showed a 9% year-over-year increase, which is an acceleration from the prior quarter and a good sign.
The wireless services firm added 656,000 postpaid wireless phone customers during the quarter vs. estimates for a 645,000 gain. “Postpaid” subscribers usually have unlimited monthly data plans. But AT&T added 280,000 fiber broadband subscribers, missing analyst views for 330,000.
AT&T reported full-year free cash flow of $14.1 billion, above analyst estimates of $13.78 billion and the firm’s prior forecast of $14 billion. The telecom giant churned out $6.1 billion in free cash flow for Q4, topping estimates of $5.37 billion.
AT&T said it expects 2023 adjusted earnings of $2.40 a share at the midpoint of its outlook. That includes a negative 25-cent impact from higher interest rates and taxes. Analysts had projected 2023 earnings of $2.56 a share on revenue of $122.8 billion.
Is AT&T Stock A Buy?
AT&T should not be bought just yet because shares are below a buy point at this time. If the stock retakes the proper entry in strong volume, it would technically be actionable. But investors want to prioritize stocks that have seen growth of at least 25% in earnings and sales in recent quarters. AT&T stock currently falls far below that.
Despite its 5.8% dividend yield, AT&T stock may not be the best stock contender for your portfolio right now. Investors should ideally wait for an improvement in the stock’s fundamentals. Investors can check IBD stock lists and other IBD content to find the best stocks to buy or watch.
Follow Fox on Twitter at @IBD_RFox for more commentary on the best stocks to buy and watch.
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