Why is AT&T so low?

With activities throughout the world, AT&T is among the biggest communications businesses. But compared to its rivals as well as the benchmark index, it has had a dismal stock market performance for the present financial year. AT&T's low stock price in comparison to past levels has many main causes.

Competitive Landscape
The wireless market in the United States is both intensively competitive and mature, as it is served by four national operators. This high competition, although beneficial to the consumer, has greatly affected AT&T. To gain more subscribers and to maintain the profit margins AT&T Internet has lowered its prices has given various incentives and has gone on aggressive promotional campaigns. This competition has restrained the expansion of revenues and affected the profits that impact the share price.

High Debt Loads
Over the years, ATT has accumulated a great deal of debt to finance capital expenditure and acquisitions, particularly the $109bn acquisition of Time Warner. Total long-term debts stand at approximately $180 billion – a factor that has contributed to the decline of its stock value. Heavy debts are dangerous in unpredictable markets and always hover over the stock like a black cloud. Reducing some debt could be beneficial in boosting the stock.

Stagnant Revenue
AT&T has reported relatively stagnant revenues over the past five years ranging between $170 and $180 billion per annum. While the company has focused its capital expenditure on the 5G business and fiber broadband segments, the revenue from these two segments has not increased significantly yet. For the year 2022, the sales volume is expected to reduce by 2 – 4% mainly due to the loss of subscribers. Inconsistent top-line growth has been a letdown to Wall Street.

Missed Projections
For instance, in the recent quarterly earnings reports, AT&T has missed the earnings and revenue estimates. Additionally, management has made negative adjustments to past predictions. When it is apparent that a company is unable to meet its expected numbers and provides lower guidance, investors start to have doubts and that manifests in a lower price per share. Gaining back the confidence of investors might be a catalyst for the stock to go up.

Dividend Cuts

AT&T has attracted income investors and supported the sustainability of its share price by maintaining a good dividend yield. Last quarter of 2021 AT&T so decided to cut the quarterly dividend from $0.52 per share to $0.27 per share to pay off its debt. This drop in the dividend eliminated a basic characteristic of a stock: the constantly high yield.

In conclusion, competitive forces, high leverage, slow revenue growth, missed targets, and dividend reductions have negatively impacted AT&T’s share prices over the last few years. Turnarounds typically require time; however, if AT&T can execute the long-term strategic plan and get back on the growth trajectory, its current valuation offers a significant margin of appreciation in the following years. Others include; Reducing debts, retaining losses among the subscribers, and improving the cash flows. Thus, first, for contrarian or value or income investors, the current prices make AT&T quite an interesting opportunity.

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