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Is AT&T Stock a ‘Sell’ after Its Q4 Earnings?

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AT&T (NYSE:T) stock is trending down in today’s trading session. The stock has fallen more than 2% as of 10:11 AM ET. The company reported mixed fourth-quarter results before the market bell on Wednesday. AT&T beat analysts’ earnings expectations but missed the sales estimates in the fourth quarter.

In the fourth quarter, AT&T reported an adjusted EPS of $0.89. The company’s adjusted EPS was higher than analysts’ estimate of $0.87. Also, the revenues of $46.82 billion missed analysts’ estimate of $46.96 billion. The fourth-quarter revenues fell about 2.4% YoY (year-over-year) from $47.99 billion. The reduction in the top line was mainly due to the net losses of video customers. However, the company reported better-than-expected postpaid phone customer net additions.

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AT&T’s customer growth

In the fourth quarter, AT&T gained 3.6 million net wireless customers in the US. The company gained 229,000 postpaid phone net customers in the fourth quarter compared to 131,000 net additions in the fourth quarter of 2018. According to FactSet’s estimate, analysts expected the company to gain 145,000 postpaid phone net customers. AT&T also added 8,000 prepaid net customers in the fourth quarter. The company posted a postpaid phone churn rate of 1.07% in the fourth quarter compared to 1.00% in the fourth quarter of 2018.

AT&T reported a net loss of 945,000 traditional pay-TV customers—more than 391,000 net losses in the fourth quarter of 2018. Wall Street expected the company to report net losses of around 641,000 pay-TV customers. AT&T is losing pay-TV customers due to competition from streaming services like Netflix and Amazon Prime. The company also lost a net 219,000 over-the-top customers. In the fourth quarter, AT&T’s Entertainment Group segment’s revenues fell 6.1% YoY to $11.23 billion. The company plans to launch its own streaming service called “HBO Max” in May.

According to a Reuters report, “AT&T reaffirmed its 2020 guidance with plans to invest between $1.5 billion and $2 billion on streaming content in 2020, and an additional $1 billion in 2021 and 2022.”

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Analysts’ recommendations

Among the 31 analysts that follow AT&T stock, 14 recommend a “buy,” 15 recommend a “hold,” and two recommend a “sell.” Analysts have given the stock a 12-month target price of $39.31, which implies a premium of 1.9% from its closing price of $38.58 on Tuesday. The company’s median target price was $41.00 on the same day.

AT&T’s stock performance

AT&T stock rose 0.86% on Tuesday and closed the trading session at $38.58. Notably, the stock was trading 2.8% below its 52-week high of $39.70 and 33.40% above its 52-week low of $28.92. At the closing price on Tuesday, AT&T had a market capitalization of $281.8 billion.

Based on the closing price yesterday, the stock was trading 0.1% below its 20-day moving average of $38.62. The stock is also trading 0.4% above its 50-day moving average of $38.43 and 1.1% above its 100-day moving average of $38.17.

AT&T’s 14-day relative strength index score is 50, which indicates that the stock isn’t oversold or overbought. AT&T’s upper, middle, and lower Bollinger Band levels are $39.52, $38.66, and $37.80, respectively. On Tuesday, the stock closed near its middle Bollinger Band level, which also indicates that it isn’t overbought or oversold.

As of Tuesday, AT&T’s dividend yield was 5.39%. In the fourth quarter, the company returned $3.73 billion to its investors in the form of cash dividends. In comparison, the company had a dividend payment of $3.63 billion in the fourth quarter of 2018. Sprint (NYSE:S) and T-Mobile (NYSE:TMUS) don’t pay equity dividends. The companies are waiting for their proposed $26.5 billion merger deal to close.

Read Why You Should Wait for a Correction to Buy AT&T Stock and Will AT&T Stock Sustain Its Momentum in 2020? to learn more.

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