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AT&T Stock Fell 9% Due to Analyst Downgrade

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On March 13, AT&T (NYSE:T) stock rose 10.02% and closed at $34.47. At the closing price, the company’s market cap was $247.2 billion. The S&P 500 and the Dow Jones Industrial Average rose 9.29% and 9.36% on the same day, respectively. The broader markets rose after the Trump administration announced that it plans to introduce a fiscal stimulus to combat the coronavirus outbreak.

As of March 13, AT&T stock was trading 13.2% below its 52-week high of $39.70 and 14.7% above its 52-week low of $30.05. On a YTD (year-to-date) basis, the stock has lost 11.8% as of March 13. The stock price has fallen 6.9% in the trailing five-day period, while it has risen 13.8% in the trailing 12-month period.

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AT&T stock downgraded

AT&T stock got a jolt today. At 10:02 AM ET, the stock was trading 9.0% lower at $31.36. The stock also declined in the pre-market trading session. Raymond James analyst Frank Louthan downgraded the stock to “market perform” from the earlier rating of “outperform.” According to a report from TheFly, “Louthan says he believes the higher leverage relative to Verizon, combined with risks to Warner Media from the loss of March Madness, NBA, and other major sports programming and advertising, and continued cords having/video subscriber losses make it less attractive in this environment relative to its peers.” The report also said, “Louthan says the dividend yield remains very attractive, and sees no risk to that, and adds that while management has already embarked on a very solid repurchase program, both of these positive factors are outweighed with the leverage and other issues.”

Financial performance

In the fourth quarter of 2019, AT&T’s revenue of $46.82 billion missed Wall Street analysts’ consensus estimates by 0.3%. The company’s revenue fell 2.4% YoY (year-over-year) in the fourth quarter of 2019. AT&T’s adjusted earnings of $0.89 were above analysts’ estimates by 2.3%. However, the company’s earnings rose 3.5% YoY in the fourth quarter of 2019.

AT&T has been struggling to reduce its huge debt levels, which spiked due to the Time Warner acquisition. The company ended 2019 with a total debt of $163.1 billion. AT&T is making efforts to deleverage its business using its FCF and asset monetizations.

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Amid a high debt burden, AT&T battles to grow its pay-TV customer base due to cord-cutting. In the fourth quarter of 2019, the company lost 945,000 pay-TV customers, which consist of U-verse and satellite TV customers. Netflix and Hulu are some of the dominant players that offer over-the-top video streaming services. As a result, AT&T’s WarnerMedia component plans to launch its streaming service this year.

Analysts’ recommendations for AT&T stock

As of March 13, 32 analysts cover AT&T stock. Among the analysts, 14 or ~43.8% recommend a “buy,” 16 or ~50.0% recommend a “hold,” and two or ~6.2% recommend a “sell.”

Analysts have an average target price of $39.43 on AT&T. The target price implies a return of 14.4% based on the closing price of $34.47 on March 13. The consensus target price for the stock has remained unchanged from the previous month.

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Stock returns

AT&T stock closed 4.9% below its 20-day moving average of $36.26 on March 13. However, the stock was 8.0% and 9.2% below its 50-day and 100-day moving averages of $37.48 and $37.95, respectively. The company’s 14-day MACD is -3.10, which suggests a downward trading trend. With a 14-day relative strength index score of 43.08, the stock isn’t overbought or oversold.

AT&T has an upper Bollinger Band level of $40.26. The company’s middle Bollinger Band level is $36.61, while its lower Bollinger Band level is $32.97. On March 13, AT&T stock closed near its lower Bollinger Band level, which suggests that it’s oversold.

On March 13, T-Mobile (NYSE:TMUS) stock rose 11.2% and closed the trading day at $85.39, while Sprint (NYSE:S) stock rose 12.7% and closed at $8.71. T-Mobile and Sprint have average broker target prices of $99.21 and $7.28, respectively. The figures suggest returns of 16.2% and -16.4%, respectively, over the next 12 months. The proposed merger agreement between the third and fourth-largest mobile operators in the US is still pending. Read Another Setback for T-Mobile and Sprint Merger Deal to learn more.

AT&T’s dividend yield was 6.0% as of March 13. Read Why Is AT&T Stock Rising Today? and Should You Consider Buying AT&T Stock? to learn more.

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