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AT&T Stock Price Higher Following Investor Update

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AT&T (T) stock rose 0.6% on Tuesday and closed the trading day at $37.55. At this closing price, the company’s market capitalization stands at about $274.3 billion. The stock is trading 5.4% lower than its 52-week high of $39.70. Also, it is trading 40.1% higher than its 52-week low of $26.80.

On Tuesday, during the Wells Fargo Global TMT Conference, AT&T CFO John Stephens provided an update to its investors.

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AT&T’s pay-TV losses

In the third quarter, AT&T reported total net losses of 1.2 million premium TV subscribers—more than 346,000 net losses in the same quarter a year ago. AT&T’s premium TV customer count fell 12.3% YoY (year-over-year) to 20.4 million in the third quarter.

The company’s premium TV customers consist of U-verse TV and DIRECTV satellite customers. AT&T also reported total net losses of 195,000 DIRECTV NOW streaming subscribers compared to 49,000 net additions in the same quarter a year ago.

AT&T’s video customer losses are mainly due to the cleaning up of its video customer base and shifting customers off promotional pricing. Stephens expects fewer future TV subscriber losses for the telecommunications giant going forward.

Stephens said, “That transition that we’re going through is…it’s tough, and we’ll
continue to go through it for the rest of this year. But we are optimistic we’ve hit the peak of losses in the third quarter, and we’re looking for AT&T TV and this—the anniversary of this new intake approach to much more rational product offerings to really help us going forward.”

The telecom company is currently beta testing AT&T TV in about 15 US markets and could be launched nationwide in 2020. AT&T’s WarnerMedia segment is also introducing its own online streaming service called HBO Max in May 2020. To learn more, read Can HBO Max Lead AT&T Stock Higher in 2020?

Like other pay-TV service operators, Comcast (CMCSA) and Charter Communications (CHTR) haven’t escaped their cord-cutting challenges. In the third quarter, Charter Communications and Comcast reported net losses of 77,000 and 222,000 residential pay-TV subscribers, respectively.

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AT&T’s free cash flow

In the third quarter, AT&T’s operating cash flow fell 7.8% YoY to $11.4 billion. Its capital expenditures also fell 11.6% YoY to $5.2 billion. The telecom company’s free cash flow (or FCF) fell 4.2% YoY to $6.2 billion.

Owing to its robust free cash flows, AT&T often pays cash dividends to its investors. The telecom company’s FCF dividend payout ratio rose from 56.1% in the third quarter of 2018 to 60.1% in the third quarter of 2019. As of December 3, AT&T’s dividend yield was 5.4%.

During the conference on Tuesday, Stephens stated that AT&T is on track to generate free cash flow in the $28 billion range for 2019. The company expects gross capital expenditures of about $23 billion in 2019. This year, the company has already exceeded its $6 billion–$8 billion target for asset monetizations. Next year, the company is targeting asset monetizations of $5 billion–$10 billion.

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AT&T’s debt level

On September 30, AT&T’s total debt was $165.2 billion, while its net debt balance was $158.6 billion. The wireless carrier is on track to achieve a net-debt-to-EBITDA ratio of 2.5x by the end of 2019.

During AT&T’s shareholder update, Stephens stated, “The company has begun retiring shares and is evaluating a 100-million-share accelerated share repurchase program for the first quarter of 2020. By the end of 2022, AT&T expects to retire 100% of the debt it incurred to acquire Time Warner, targeting a net debt-to-adjusted EBITDA ratio in the 2.0x to 2.25x range, and expects this to lead to an upgrade in its debt ratings.”

Stock performance

AT&T stock closed 2.8% above its 100-day moving average of $36.54 yesterday. However, the stock was 2.2% and 1.2% below its 20-day and 50-day moving averages of $38.40 and $38.01, respectively.

AT&T’s 14-day MACD is -0.61, which denotes a downward trading pattern. With a 14-day RSI score of 44.52, the stock is currently neutral.

AT&T has an upper Bollinger Band level of $40.25. The telecom company’s middle Bollinger Band level is $38.41, while its lower Bollinger Band level is $36.56. On December 3, AT&T stock closed near its middle Bollinger Band level, which denotes that it isn’t oversold or overbought.

In the third quarter, AT&T reported adjusted EPS of $0.94 on total revenue of $44.6 billion. In the fourth quarter, the company will likely report adjusted earnings per share of $0.88, which would represent a rise of 2.3% on a YoY basis. Meanwhile, analysts expect the company’s total revenues to decrease 2.0% YoY to $47.1 billion in the December quarter.

On Tuesday, T-Mobile (TMUS) stock rose 0.5% and closed the trading day at $78.01, while Sprint (S) stock fell 0.9% and closed at $5.69. The proposed $26 billion merger deal between T-Mobile and Sprint is still pending. The merger deal faces a lawsuit filed by various states and the District of Columbia to stop the combination on antitrust grounds. A district court hearing for the multistate lawsuit is scheduled to begin next week.

To learn more, please read Does AT&T Stock Have Room to Grow after Its Rally? and AT&T’s Dividend Yield Gets More Attractive.

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