AT&T (T) is one of the most recognizable wireless phone providers in the US. The telecommunications and media conglomerate can be seen as a safe haven when stock markets turn volatile. AT&T also maintains a high annualized dividend yield of 5.8% amid relatively low interest rates. Should investors consider buying AT&T stock?
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The stock market is currently in an uptrend, indicating that it is time to increase your exposure. Investors should aim for a stock position of around 60% to 80%, and You should look for leading stocks in leading industry groups that are outperforming the market and approaching buying points.
AT&T Stock Analysis
AT&T stock had a rough 2022 until the last quarter, when the stock formed the right-hand side of a large cup base. Thanks to a powerful earnings report on October 20, the stock soared and looked strong. The stock also recaptured key moving averages such as the 50-day and 200-day lines.
In mid-December, shares began to form a handle with a buy point at 19.62. On January 6, AT&T passed that buy point, but has since undermined entry. Still, the stock remains close to the buy point. The stock has chipped away at support at its 21-day line, but remains above the 50-day line.
AT&T stock has a relative strength score of 61, which is below the 80 low for portfolio competitors. Meanwhile, his 48 composite rating is also weak. The stock’s EPS rating, which is included in the composite, also sits at a low 61, hindering the stock’s overall strength.
The relative strength line has a negative slope. The RS line measures a stock’s performance compared to the S&P 500. Ideally, an RS line should be at or near a new high when a stock breaks out.
In December, it was announced that AT&T and black rock (BLK), the world’s largest asset manager, has agreed to form a joint venture that will expand fiber optic network and broadband services outside of the telco’s current fixed-line footprint.
The joint venture, known as Gigapower, will sell wholesale fiber services to Internet service providers and other companies. Gigapower will expand fiber optic network services outside of AT&T’s traditional 21-state fixed line service footprint.
AT&T still plans to expand its own fiber-optic network to more than 30 million homes and businesses by the end of 2025. At the end of the September quarter, it had 18.5 million.
AT&T earnings
AT&T was expected to report fourth-quarter revenue of $31.4 billion, but comfortably outperformed views, posting revenue of $40.96 billion on January 25. Revenue rose 1% year-over-year, its first revenue growth in at least seven quarters.
Meanwhile, the company missed bottom line expectations with earnings per share of 56 cents. Earnings were up 9% year-over-year, which is an acceleration from the previous quarter and a good sign.
The wireless carrier added 656,000 postpaid mobile phone customers during the quarter against estimates of a gain of 645,000. “Postpaid” subscribers typically have unlimited monthly data plans. But AT&T added 280,000 fiber broadband subscribers, missing out on analyst views for 330,000.
AT&T reported free cash flow for the full year of $14.1 billion, above analyst estimates of $13.78 billion and the company’s previous forecast of $14 billion. The telecommunications giant generated $6.1 billion in free cash flow for the fourth quarter, beating estimates of $5.37 billion.
AT&T said it expects 2023 adjusted earnings of $2.40 a share at the midpoint of its outlook. That includes a 25-cent negative impact from higher interest rates and taxes. Analysts had projected 2023 earnings of $2.56 per share on revenue of $122.8 billion.
Is AT&T Stock a Buy?
AT&T should not be bought yet because the stock is below the buy point right now. If the stock again takes the proper entry on strong volume, it would be technically actionable. But investors want to prioritize stocks that have seen at least 25% growth in earnings and sales in recent quarters. AT&T stock is currently well below that.
Despite its 5.8% dividend yield, AT&T stock may not be the best stock competitor for your portfolio right now. Ideally, investors should expect an improvement in equity fundamentals. Investors can browse IBD stock listings and other IBD content to find the best stocks to buy or watch.
Follow Fox on Twitter at @IBD_RFox for more feedback on the best stocks to buy and watch.
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