As AT&T delivers solid quarterly performance, is it time to invest?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 22, 2021
  • AT&T shares edged higher slightly on Thursday pre-market after announcing Q2 results.
  • The company reported revenue and non-GAAP EPS that beat analyst expectations.
  • The company also raised its fiscal year 2021 guidance for revenue and earnings.

AT&T Inc. (NYSE:T) announced better than expected results on Thursday before markets opened. The T stock price edged 1.36% higher after Q2 revenue soared 7.4% to $44 billion, beating analyst expectations by $1.27 billion. Also, the company’s non-GAAP EPS of $0.89 beat the consensus Street estimate by $0.10, while GAAP earnings per share of $0.21 missed expectations by $0.43.

The company issued an improved full-year 2021 guidance, raising revenue growth expectations to the 2-3% range, up from the previous guidance of 1% growth. AT&T also expects non-GAAP earnings per share to grow by low-to-mid single digits this year, up from a flat change initially.

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The Dallas, TX-based conglomerate also expects free cash flows in the $27 billion range, up from the previous figure, $26 billion.

The company said:

we’re raising our global HBO Max year-end forecast to 70 million to 73 million subscribers. Also, we’re updating full-year guidance for consolidated revenue, wireless service revenue, adjusted EPS, and free cash flow.

Should you invest in AT&T in Q3 2021?

From a valuation perspective, AT&T shares trade at an attractive forward 12-month P/E ratio of just 8.93, making the stock a compelling buy for value investors. In addition, RBC Capital Markets Thursday resumed AT&T coverage with an equal-weight (neutral) rating and a price target of $30 per share, implying an upside potential of about 7.5%.

Despite AT&T’s revised earnings expectations for fiscal 2021, analysts expect the bottom line to decline by 139% this year before falling slightly by 1.36% next year. Therefore, growth investors may want to search for other options. However, AT&T’s impressive dividend yield of 7.46% will be compelling to dividend investors.

Source – TradingView

Technical overview: AT&T price predictions for Q3 2021

Technically, AT&T shares appear to be trading within a descending channel formation in the daily chart. The stock price remains very close to oversold conditions following the sharp plunge in May.

However, T’s impressive Q2 results coupled with the upbeat guidance for 2021 could spark a rebound. Therefore, investors can target profits at $29.39 or higher at $30.77. The support level is $26.62. The stock closed at $27.90 on Wednesday.

Bottom line: the catalyst for buying AT&T stock rebound

Although analysts are not optimistic about AT&T’s earnings growth this year, the company’s upbeat guidance will boost the stock price in the short term. 

In addition, the stock continues to trade very close to oversold levels, leaving little room for more downward movement. Therefore, a rebound looks imminent.

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