AT&T (T) is one of the most recognizable wireless phone carriers in the U.S. The telecom and media conglomerate has been having a better year so far than it did last year. AT&T stock was down over 26% in 2020, even after recovering nearly 30% from its lows of the coronavirus bear market. So far in 2021, share have traded down 4%. On the positive side, the stock maintains a high 7.5% annualized dividend yield in a very low interest rate environment. Additionally, telecom stocks are sometimes viewed as a safe haven when stock markets turn volatile. Should investors consider buying AT&T stock?
Currently, the stock market is in an uptrend which means it’s a great time to identify top stock contenders for your portfolio and initiate new positions. Investors should seek out leading stocks in leading industry groups that are outperforming the market.
Now the question is, does AT&T stock deserve a spot in your portfolio or on your watchlist? Let’s look at AT&T from a CAN SLIM perspective.
Is AT&T Stock A Leader Or Laggard?
According to IBD Stock Checkup, AT&T stock ranks No. 5 in terms of Composite Rating within the telecom services industry group. Of the top seven stocks in the group, AT&T ranks fourth in terms of price performance so far this year. Shares are down roughly 4%. Given its position relative to its peers, it’s safe to say that AT&T is not a leading stock.
AT&T Technical Analysis
AT&T stock had formed a new flat base with a 31.99 buy point between January and May of this year. But the breakout failed in late May when share gapped below the 50-day line in heavy volume. Shares of AT&T have since fallen below their 200-day moving average as well.
The recent base was a first stage — a bullish sign. Breakouts from first- or second-stage bases are more likely to work than those from later patterns. However, the breakout failed as shared couldn’t hold enough momentum to follow through on the breakout, which occurred on May 4.
Also on the negative side, AT&T stock currently maintains a very low Relative Strength Rating of only 20, which is well below the minimum of 80 for ideal growth stock contenders.
With the RS line trending lower in recent weeks, AT&T stock is showing serious weakness from a relative strength perspective. The RS line measures a stock’s performance against the S&P 500. Ideally, an RS line should be at or near a new high when a stock breaks out.
AT&T Stock By The Numbers And Ratings
AT&T, which in May agreed to merge its WarnerMedia business with Discovery (DISCA), reported earnings on Jul. 22. Earnings and revenue for the June-ended quarter beat Wall Street projections as the company added more wireless postpaid phone subscribers than expected. AT&T said it added 789,000 postpaid wireless phone customers vs. estimates for a 287,000 gain.
The firm’s quarterly profit rose to 89 cents a share, up 7% from a year earlier. Revenue rose 8% to $44 billion, exceeding analysts’ estimates. A year earlier, AT&T earned 83 cents a share on revenue of $40 billion.
Wireless service revenue climbed 5% to $14.3 billion, topping estimates of $14.1 billion. Meanwhile, revenue at the company’s WarnerMedia division popped nearly 31% to $8.8 billion from a year earlier.
“For now, AT&T is doing its level best to make hay while the sun shines,” said Craig Moffett, analyst at Moffett Nathanson. “They are pulling out all the stops to generate unit growth, even if that means rather muted growth in EBITDA. Their promotionality has left their subscriber base growing at blistering pace and, with the additional boost of 30% revenue growth from WarnerMedia as the segment bounces back from Covid, they’re seeing their fastest revenue growth in memory.”
The telecom said it added 2.8 million HBO and HBO Max streaming video subscribers in this quarter. AT&T also said it had 47 million subscribers, up nearly 11 million subscribers from a year earlier.
Analysts see 2021 EPS rising 3% for AT&T, which is a positive. But they estimate a 3% loss for 2022.
Is AT&T Stock A Buy?
AT&T stock should not be bought right now based on its technical analysis since its nowhere near a new buy area and is trading below key moving averages. Also, despite the firm’s positive growth in wireless subscribers and earnings, investors want to prioritize stocks that have seen growth of at least 25% in earnings and sales in recent quarters. T stock currently falls far below that.
Despite its 7.5% dividend yield, AT&T stock is not one to be added to your portfolio right now based on substandard price performance. Investors will need to wait for the stock to form a better chart pattern and regain strength fundamentally. Investors can check IBD stock lists and other IBD content to find the best stocks to buy or watch.
Follow Fox on Twitter at @foxonstocks for more commentary on the best stocks to buy and watch.
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