AT&T (NYSE:T) stock fell 2.4% on Tuesday and closed the trading day at $36.30. At this closing price, the company’s market capitalization is about $260.4 billion. The stock is trading 8.6% lower than its 52-week high of $39.70. Also, the stock is trading 22.1% higher than its 52-week low of $29.74.
On Tuesday, during the Morgan Stanley Technology, Media and Telecom Conference, AT&T President and COO John Stankey provided an update for investors.
AT&T’s pay-TV losses
In 2019, AT&T reported total net losses of 3.4 million premium TV customers—more than 1.2 million net losses in 2018. The company’s premium TV customer count fell 15.0% YoY (year-over-year) to 19.5 million in 2019.
The company’s premium TV subscribers include U-verse TV and DIRECTV satellite subscribers. AT&T also reported net losses of 665,000 over-the-top subscribers in 2019 compared to 436,000 net additions in 2018.
AT&T’s video subscriber losses are mainly due to intense competition from streaming services like Amazon Prime and Netflix. During the conference on Tuesday, Stankey stated that AT&T’s WarnerMedia segment is on track to launch HBO Max, its streaming service, in May.
Like other pay-TV service operators, Charter Communications (NASDAQ:CHTR) and Comcast (NASDAQ:CMCSA) are losing traditional video customers. In 2019, Charter Communications and Comcast reported net losses of 484,000 and 671,000 residential pay-TV customers, respectively.
AT&T’s 5G network
As of February, AT&T’s wireless 5G network covers 80 million people. The company plans to have nationwide 5G coverage by mid-2020. During the conference on Tuesday, Stankey said that “based on expected 5G growth and HBO Max opportunities, mobility will continue to be the biggest driver of revenue growth and profitability.” He also said, “AT&T also expects FirstNet to contribute to wireless revenue growth, with FirstNet subscriber additions ramping as push-to-talk capabilities and new devices drive growth. The company expects wireless service revenues to grow by more than 2% in 2020.”
Share repurchase agreement
In the second quarter of 2020, AT&T plans to retire $4 billion worth of shares through an accelerated share repurchase program. On Tuesday, Stankey said, “AT&T has said it intends to use 50% to 70% of free cash flow after dividends to retire about 70% of the shares it issued to fund the acquisition of Time Warner — now WarnerMedia — by the end of 2022. Year to date in 2020, AT&T has raised $4 billion via the issuance of preferred shares.”
Free cash flow and debt
In 2019, AT&T’s operating cash flow rose 11.6% YoY to $48.7 billion. The company’s capital expenditures fell 7.6% YoY to $19.6 billion. Meanwhile, the company’s FCF (free cash flow) rose 29.9% YoY to $29.0 billion.
Due to the strong FCF, AT&T pays regular cash dividends to its shareholders. However, the company’s FCF dividend payout ratio fell from 60.0% in 2018 to 51.3% in 2019.
During the conference on Tuesday, Stankey stated that AT&T is confident about generating FCF of $28 billion in 2020. The company also expects gross capital investments of about $20 billion this year. In 2020, the company is targeting asset monetizations of $5 billion–$10 billion.
As of December 31, 2019, AT&T’s total debt was $163.1 billion, while its net debt balance was $151.0 billion. The mobile operator is on track to achieve a net-debt-to-adjusted EBITDA ratio of 2.0x–2.25x by the end of 2022.
AT&T stock closed 3.7% below its 20-day moving average of $37.71 on Tuesday. However, the stock was 5.0% and 4.9% below its 50-day and 100-day moving averages of $38.22 and $38.21, respectively. AT&T’s 14-day MACD is -1.29, which indicates a downward trading pattern. With a 14-day relative strength index score of 40, the stock isn’t overbought or oversold.
AT&T has an upper Bollinger Band level of $39.60. The company’s middle Bollinger Band level is $37.71, while its lower Bollinger Band level is $35.82. On Tuesday, AT&T stock closed near its lower Bollinger Band level, which indicates that it’s oversold.
In the fourth quarter of 2019, AT&T reported an adjusted EPS of $0.89 on net revenue of $46.82 billion. In the first quarter of 2020, the company will likely report an adjusted EPS of $0.87, which would represent a rise of 1.2% on a YoY basis. Meanwhile, analysts expect the company’s total revenues to decrease by 0.3% YoY to $44.7 billion in the March quarter.
On Tuesday, T-Mobile (NYSE:TMUS) stock fell 4.2% and closed the trading day at $89.37, while Sprint (NYSE:S) stock fell 4.4% and closed at $9.10. The merger deal between T-Mobile and Sprint will likely close by April 1. To learn more about the merger deal, read T-Mobile Hit by Layoffs amid Sprint Merger and T-Mobile and Sprint Amend Merger Terms, Hurdles Remain.
AT&T stock is trending upward in today’s pre-market session. The stock rose by about 1.6% at 7:46 AM ET. The company’s dividend yield is 5.73% as of Tuesday. Read Should You Consider Buying AT&T Stock? to learn more.