Why AT&T Might Not Sell DIRECTV



Last week, activist investor Elliott Management, which owns a stake worth $3.2 billion in AT&T (T), pressured the company to sell some of its non-core businesses like DIRECTV. The investment firm also asked the company to focus on its main telecommunications business and end its acquisition spree. Elliott Management expects AT&T stock to reach about $60 per share by the end of 2021. The target price represents more than 63% upside potential from the closing price of $36.76 on Wednesday.

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AT&T might not sell DIRECTV

On Wednesday, the Wall Street Journal reported that AT&T plans to sell DIRECTV. The report said, “The telecom giant has considered various options, including a spinoff of DirecTV into a separate public company and a combination of DirecTV’s assets with Dish Network Corp., its satellite-TV rival.”

However, on the same day, Reuters reported that AT&T and Dish Network (DISH) “are not in discussions over a deal due to regulatory issues.” The report came after the Wall Street Journal reported that the company might combine DIRECTV with Dish Network.

During the Bank of America Merrill Lynch Media, Communications & Entertainment Conference on September 11, AT&T’s CFO, John Stephens, said, “So there’s been some stories out there about the industrial logic about putting a two satellite providers that’s been tried from a regulatory perspective. It hasn’t been successful and I don’t know that there’s any change in that regulatory perspective.”

AT&T and Dish Network didn’t comment on the matter.

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AT&T is losing pay-TV customers

In the third quarter, AT&T is expected to lose about 1.1 million premium TV subscribers. In the second quarter, the company reported total net losses of 778,000 premium TV customers—more than 262,000 net losses in the same quarter last year. AT&T’s premium TV subscriber count fell 8.7% YoY (year-over-year) to 21.6 million in the second quarter. The company’s premium TV subscribers consist of U-verse TV and DIRECTV satellite subscribers.

Like other pay-TV service providers, Comcast and Charter Communications haven’t escaped cord-cutting challenges. In the second quarter, Charter Communications and Comcast reported net losses of 150,000 and 209,000 residential pay-TV subscribers, respectively.

Stock returns

AT&T stock closed 1.08% lower on Wednesday at $36.76. Notably, the stock is trading 5.14% lower than its 52-week high of $38.75. The company is trading 37.16% higher than its 52-week low of $26.80. On Wednesday, T-Mobile (TMUS) stock fell 0.11% and closed at $80.12. Sprint (S) stock fell 0.74% to $6.73 on the same day.

AT&T stock has risen 28.8% YTD (year-to-date). The stock has returned 5.1% in the trailing one-month period and 9.0% in the trailing 12-month period. In comparison, Sprint and T-Mobile have seen their stock prices rise 15.6% and 26.0%, respectively, YTD.

Based on the closing price on Wednesday, AT&T stock was trading 1.5% above its 20-day moving average of $36.21. The stock was trading 5.5% above its 50-day moving average of $34.83. The company was trading 10.0% above its 100-day moving average of $33.41. AT&T’s 14-day relative strength index score is 56.87, which suggests that investors are neutral toward the stock.

On Wednesday, AT&T stock closed near its Bollinger Band mid-range level of $36.21. The value suggests that the stock isn’t overbought or oversold.

Read Why AT&T Stock Hasn’t Had a Great Start This Week and AT&T Stock: Why Are Analysts Losing Confidence? to learn more about what’s driving the stock. Also, read Should AT&T Be on Your Shopping List in September? to learn more about Elliott Management’s suggestions for the company.


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