AT&T stock price flashes an alarming pattern ahead of earnings

AT&T stock price has come under pressure in the past few weeks, and technicals suggest that it may crash further in the near term. T was trading at $26 on Tuesday, down modestly from the year-to-date high of $30.

AT&T stock forms a double-top pattern 

The weekly timeframe chart shows the AT&T stock price has been in a downward trend in the past few weeks, moving from a high of $30 to $26.20 today.

A closer look shows that the stock has formed a double-top pattern at ~$30 and a neckline at $22.95, its lowest level this year. A double-top is one of the most common bearish reversal signs in technical analysis.

The stock is hovering near the 23.6% Fibonacci retracement level and has moved slightly below the 50-week Exponential Moving Average (EMA). Also, the Relative Strength Index (RSI) and the Aroon Oscillator have pointed downwards.

Therefore, the double-top pattern points to a bearish breakdown in the coming days possibly after the company publishes its financial results on Wednesday this week. 

More downside may push the stock downward, possibly to the key support level at $22.95, its lowest level this year and the neckline of the double-top pattern. This target is about 12.5% below the current level.

AT&T stock chart | Source: TradingView 

AT&T to publish its earnings this week 

The next important catalyst for AT&T stock will be its earnings, which will come out on Wednesday this week.

Analysts expect these results to show that its revenue held steady in the first quarter, helped by the strong postpaid phone additions and little churn.

The average estimate is that its revenue rose by 2% to $31.24 billion, while its earnings-per-share (EPS) rose to $0.55 from $0.51 in the same period a year earlier. 

Its guidance for the second quarter is that its revenue will rise by 2.44% to $31.6 billion. AT&T’s earnings have done better than estimates in the last three consecutive quarters, meaning that the trend will likely continue this time.

AT&T has gone through a major turnaround in the past few years. It exited the media industry by spinning off its Warner Bros business, and at some point, it slashed its dividend, a move that hurt many income investors.

In the long-term, the company said that its business will continue generating low-single-digit service revenue in the coming years, with the adjusted EBITDA rising by between 3% and 4%.

AT&T also announced plans to boost shareholder returns. It plans to spend over $45 billion in dividends and buybacks between 2026 and 2028. It will maintain its dividend at $1.11 per share.

Analysts believe that the AT&T stock price is a bargain. Data shows that the average stock price estimate is $30.4, up modestly from the current $26. Some of the most notable analysts who boosted the estimate were from Scotiabank, Citigroup, and Goldman Sachs.

Therefore, while the company has modest fundamentals, technicals are sending a different message. This could be a sign that the stock will drop before staging a strong comeback later this year.