AT&T stock price analysis: steady dividend, rating upgrade

on Jul 10, 2024

AT&T (NYSE: T) stock price has staged a strong comeback in the past few months, making it one of the best telecom companies in the US. It bottomed at $12.75 in July last year to almost $20 today. This recovery has brought its market cap to over $134 billion.

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AT&T turnaround is underway

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AT&T, one of the biggest companies in the telecom industry, has gone through major upheavals in the past decade. 

Its stock has crashed by over 34% in this period while the company has lost its dividend aristocrat status when it slashed its payout in 2022. 

The management has now worked to turn around the company and reduce its substantial debt. It has already abandoned its media ambitions by spinning off its Time Warner business, forming Warner Bros. Discovery, the parent company of HBO and CNN.

It has also worked to reduce its costs by laying off over 12,000 workers in the past few years in a bid to boost its profits.

These results are starting to bear fruit as its revenue stabilises. Data by SeekingAlpha shows that the company’s total revenue dropped from over $181.1 billion in 2018 to over $122.4 billion in 2023. 

In 2023, its revenue jumped from over $120.7 billion in 2022 to over $122.4 billion. The company has also starting to turn a profit. It made a net loss of over $8.5 billion in 2022 to over $14.4 billion.

The most recent results shows that the company’s revenue rose to over $32 billion in the last quarter, a 10% increase from the same period in 2023. Its free cash flow rose to $6.4 billion, bringing the annual free cash flow to over $16.8 billion. AT&T’s cash from operations rose by $1 billion to over $11.4 billion.

The company has started to achieve stable growth as it added 526k postpaid phone adds in the last quarter and over 1.7 million during the year. Its fiber during the quarter stood at over 1.1 million. 

Dividend growth to resume

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AT&T expects that its business will do well this year. It expects that its free cash flow will be between $17 billion and $18 billion this year while its adjusted EBITDA growth will be 3%. 

Therefore, this free cash flow growth will help it maintain and also grow its dividends in the coming years. It will also help it to reduce its debt, which stands at over $137.3 billion. It hopes to achieve its net debt-to-adjusted EBITDA to be 2.5x in the first half of this year.

AT&T has a dividend yield of 5.90%, which is higher than most companies. It is also a relatively affordable stock as it trades at a forward P/E ratio of 9.2, which is higher than the sector median of 16.

AT&T stock price analysis

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at&t stock

AT&T chart by TradingView

The weekly chart shows that the AT&T share price has done well in the past few months. It has moved above the upper side of the descending channel, meaning that bulls have prevailed. 

The stock has also formed a golden cross as the 50-week and 200-week exponential moving averages (EMA) made a bullish crossover. In most cases, this is one of the most popular chart patterns.

The MACD indicator has moved above the neutral point while the Relative Strength Index (RSI) is approaching the overbought level. Therefore, the stock will likely continue rising as buyers target the key resistance point at $20.40, its highest point in 2016 and 2017. A break above this level will point to more gains at $22.20, its 2020 high.

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