On Thursday, AT&T (T) and Nexstar Media signed a new multiyear content carriage contract, which ended an eight-week blackout.
AT&T and Nexstar resolve carriage fee dispute
The two companies issued a joint statement. According to the statement, they “have entered into a new multi-year retransmission consent agreement.” Nexstar’s local channels including ABC, CBS, NBC, and Fox will return to AT&T’s DIRECTV, U-verse TV, and AT&T TV platforms.
In the joint statement, AT&T’s management said, “Our customers want more choice and value and we are pleased to deliver that through this new agreement with Nexstar and its many local stations.” Nexstar’s management stated that the new deal “will allow us to continue delivering our stations’ leading network and sports content as well as local news and other programming to AT&T subscribers in our markets.”
The carriage dispute impacted 120 stations across 97 US markets. AT&T and Nexstar reached a new deal after the previous contract expired on July 3. In the statement, the companies said that they regretted the inconvenience caused to “customers, viewers and advertisers.” AT&T and Nexstar didn’t disclose the financial terms of the new contract.
Earlier in August, AT&T and CBS reached an agreement. CBS renewed its distribution contract with AT&T.
AT&T is losing pay-TV subscribers
The carriage dispute between AT&T and Nexstar came when the traditional pay-TV market started struggling to compete with over-the-top services like Amazon Prime and Netflix. In the second quarter, AT&T lost net 778,000 premium TV subscribers—more than its net loss of 544,000 in the first quarter. The premium TV customers include DIRECTV satellite and U-verse TV customers.
Other traditional pay-TV service providers, including Comcast, Charter Communications, and Dish Network, are witnessing declines in their video customer bases due to cord-cutting. In the second quarter, Dish Network lost 31,000 pay-TV subscribers compared to 151,000 losses in the second quarter of 2018. In the second quarter, Comcast and Charter lost 209,000 and 150,000 residential video customers. The companies lost 136,000 and 73,000 residential video customers, respectively, in the second quarter of 2018. Netflix added 2.7 million customers worldwide in the second quarter.
AT&T’s stock performance
On Thursday, AT&T stock closed at $35.15, which implies a rise of 0.5% from the previous day’s closing price. Currently, the stock is trading at a discount of 1.0% to its 52-week high of $35.50. The stock is trading at a premium of 31.2% to its 52-week low of $26.80.
Year-to-date, AT&T has returned 23.2%, while the S&P 500 Index has risen 5.6% since the beginning of this year. Despite the surge in AT&T’s stock price in 2019, the company is still trading at a discount of 14.2% to its three-year high of $43.03.
Among the 28 analysts tracking AT&T, 15 recommend a “buy,” 12 recommend a “hold,” and one recommends a “sell.” The analysts gave a 12-month average target price of $35.00. The target price indicates a downside potential of 0.4% from the current price. The stock’s median target price is $37.00 as of the same date.
As of Thursday, AT&T’s market capitalization was $256.8 billion. AT&T is the largest US mobile carrier in terms of market capitalization. Sprint’s (S) market capitalization was $27.9 billion, while T-Mobile’s (TMUS) market capitalization was $66.7 billion.
Forward PE ratio
AT&T continues to trade at a lower valuation multiple than its peers. The company was trading at a forward PE ratio of 9.76x on Thursday. T-Mobile was trading at a forward PE ratio of 17.20x.
On Thursday, AT&T was trading at 9.86x analysts’ 2019 EPS estimate of $3.56. Meanwhile, the company was trading at 9.71x analysts’ 2020 EPS estimate of $3.62. The company’s EPS will likely increase 1.1% in 2019 and 1.7% in 2020.
Based on the closing price on Thursday, AT&T stock was trading 1.4% above its 20-day moving average of $34.65, 3.7% above its 50-day moving average of $33.90, and 7.4% above its 100-day moving average of $32.74. On the downside, the company’s immediate key support lies near $35.02, while $35.30 could act as an immediate key resistance level on a daily basis. AT&T’s 14-day RSI (relative strength index) score was 60, which could be approaching overbought territory. An RSI score higher than 70 suggests that a stock could be overbought and investors could take it as a “sell” signal.
In the trading session on Thursday, AT&T stock closed near its upper Bollinger Band level of $35.64. The Bollinger Band value shows that the stock is overbought. Investors could take the value as a “sell” signal.