PreMarket Prep Stock Of The Day: AT&T

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

During the recent wicked rotation out of growth stocks and into value stocks, one of the kings of value sporting a 7% dividend yield is now starting to participate. That being AT&T T, which is the PreMarket Prep Stock Of The Day.

Horrible Relative Performance: Any way you want to call it, AT&T has been a poor long-term performer. Of course, you can factor in the hefty dividend it has paid over the years, but based on capital appreciation or lack of, it has been a dog.

AT&T made its all-time high in September 2001 ($47.50). One year later, it made its all-time low at $19.57. It revisited the $40 area in late 2007, mid-2016, early 2017 and most recently in January 2019.

To best describe the back and forth price action, it has been in a trading range. Starting with September 2010 low ($27.06) to $40 with a vast majority of the price action between $30 and $36.

What’s The Problem? The company has a long history of making poor acquisitions by overpaying for companies and eventually having to write them off at a steep discount to the original purchase price. Along the way, AT&T has accumulated tons of debt used to finance the poor acquisitions.

This is not a new phenomenon for the company.

Some may harken back to 1991 when the company ramped up an in-house effort to sell PCs and servers. Instead of exiting the market, AT&T subsequently purchased NCR in 1991. A difference in management styles among the top executives doomed the merger from the start. As a result, the NCR management was replaced and after years of struggling NCR was spun off in 1997.

In 2015, AT&T acquired DirecTV for $48.5 billion ($67 billion with debt) and hoped to pair the national pay-TV company with its wireless service to offer a discounted bundle to customers.

Last month, AT&T did a deal with TPC that values the unit at $16.25 billion. AT&T will own 70% and TPG will own 30% of the new DirecTV, which will include all three of the aforementioned businesses. AT&T will receive $7.8 billion from the new venture after the spinoff is complete, including the assumption of $200 million in debt.

Finally A Winner? After a long drawn-out battle with the DOJ (2016-2018), AT&T purchased Time Warner for $85.4 billion in cash and stock with the total cost being up to $108.4 billion.

The company’s original goal back in 2019 was to reach 50 million U.S. subscribers by 2025. Before the open on Friday, the company said it now expects global subscribers of between 120 million and 150 million for HBO Max and HBO by the end of 2025.

Also, HBO Max is expected to expand to around 60 markets outside the U.S. this year and will launch a lower-cost version with advertising in June.

Price Action: AT&T has come to life over the last few weeks. After bottoming on Feb. 26 ($27.89), it has been flirting with a close over $30 every day this week. It ended Thursday’s session at $29.54 and after a higher open, which stands as the low for the day ($29.90), the issue has reached $30.86 as of 12:30 p.m. ET.

That marks the highest level for the issue since it peaked on Dec. 14 at $31.27. It hasn't closed over $30 since Dec. 16, when it ended the season at $30.29.

Photo by Luismt94/Wikimedia.