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How Could AT&T Stock Perform in 2020?

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In 2020, AT&T’s (T) management expects adjusted EPS of $3.60–$3.70. Analysts expect its adjusted EPS to grow 1.7% YoY (year-over-year) to $3.60. Analysts expect AT&T’s sales to rise, and they expect AT&T’s revenue to rise by 0.4% YoY to $182.1 billion in 2020. AT&T’s management forecast sales growth of 1%–2% this year.

In 2020, the telecom company’s management expects free cash flow and gross capital expenditures of about $28 billion and $20 billion, respectively. The company expects to monetize about $5 billion–$10 billion worth of non-core assets this year. Lastly, the wireless carrier targets a dividend payout ratio in the low 50% range.

AT&T is confident about the success of its upcoming streaming service, HBO Max, in May. The service should cost $14.99 per month and would debut with 10,000 hours of content.

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5G

AT&T launched a low-band 5G network service in 10 additional cities, according to a December 30, 2019, FierceWireless report. The new cities include:

  • Bridgeport, Connecticut
  • Washington, DC
  • Louisville, Kentucky
  • Boston, Massachusetts
  • Baltimore, Maryland
  • Detroit, Michigan
  • Las Vegas, Nevada
  • Buffalo, New York
  • New York City
  • Philadelphia, Pennsylvania

That brings the total number of markets with AT&T 5G to 20.

According to FierceWireless, “The carrier’s low-band 5G is meant to provide broader coverage and AT&T has pledged nationwide service by the first half of 2020. With the launch of its service using 850 MHz spectrum, AT&T finally opened up 5G to consumer customers, who will need a compatible Samsung Galaxy Note 10+ 5G device.”

The report added, “AT&T’s low-band 5G is not to be confused with its 5G+ service, which uses high-band millimeter wave spectrum that delivers massive capacity and super-fast speeds.” The telecom company launched a 5G+ service in 2018. The company has activated 5G+ service in about 20 cities, but only for business customers.

In December, T-Mobile (TMUS) activated its 5G service nationwide, using available low-band 600 MHz spectrum.

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AT&T’s quarterly dividend

In December, AT&T announced a quarterly dividend hike of about 2% to $0.52 per share from $0.51. The new dividend is set to be paid on February 3 to stockholders of record on January 10. The hike brings its annual dividend to $2.08 per share.

On December 31, AT&T had a dividend yield of 5.32%. In comparison, Sprint (S) and T-Mobile don’t pay equity dividends.

Analysts’ fourth-quarter forecast

AT&T is expected to release its fourth-quarter earnings on January 29. Analysts project adjusted Q4 earnings per share of $0.88 for AT&T, which implies a rise of 2.3% YoY. However, Wall Street expects the company’s fourth-quarter consolidated revenues to fall 2.0% to $47.0 billion.

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Technical analysis of AT&T stock

On December 31, the telecom giant closed the trading day at $39.08. Based on that closing price, the stock was trading as follows:

  • 2% above its 100-day moving average of $37.49.
  • 7% above its 50-day moving average of $38.42.
  • 3% above its 20-day moving average of $38.57.

AT&T has a 14-day RSI (relative strength index) score of 60, which means that the stock is approaching the overbought zone. The stock’s 14-day MACD is 0.32, which indicates an upward trading pattern.

Analysts’ recommendations and target price

Of the 30 analysts covering AT&T stock, 13 suggest a “buy,” and 15 suggest a “hold,” compared with 13 and 14, respectively, last month. Two analysts suggest a “sell,” the same as last month.

Their 12-month target price of $39.02 for AT&T stock implied a 0.2% downside potential based on its December 31 price. Their median target price was $40.50.

T-Mobile is rated as a “buy” by 17 out of 22 Wall Street analysts. T-Mobile’s mean target price of $90.16 implies a 15.0% upside from its current level of $78.42. Sprint is rated as a “buy” by just two of the 17 analysts. Sprint’s target price of $6.41 implies 23.0% upside potential.

Stock performance

AT&T stock rose 0.10% on December 31 and closed the trading day at $39.08. This was 38.1% above its 52-week low of $28.30, and 1.6% below the 52-week high of $39.70. At Tuesday’s closing price, AT&T had a market capitalization of $285.5 billion.

Up 36.9% in 2019, AT&T stock has performed better than the broader market and its telecom peers. In 2019, T-Mobile and Sprint returned 23.3% and -10.5%, respectively. Meanwhile, the S&P 500 Index has risen by 28.9%.

Read Will Debt Affect AT&T’s Dividend Yield? and AT&T Stock: Jim Cramer Likes It—Should You Buy? to learn more. You can also read Options Traders Think AT&T Stock Will Climb Higher.

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