AT&T Inc. Shares Could Be Setting Up For A Push Higher
The stock of AT&T Inc. (NYSE: T) has been mired in a consolidation phase since early 2013. After setting what appears to have been an “abc” bottom in early 2014, the stock rallied nicely into early May and since has been correcting in another “abc” formation.
The company has its fingers in multiple industries, some growth oriented and others more stable cash cows. AT&T may attract different types of buyers at different parts of the market cycle. Value, dividend and low-beta investors, and traders will be eagerly buying up shares as long as the stock holds up above technical support levels.
Can the company's fundamentals get the growth investors involved at some point?
What The Bulls See
- An attractive 5.2 percent dividend yield.
- Cheap valuation metrics: enterprise value of $256 billion trumps the market capitalization of $182.75 billion, price to book of 1.98 and price to sales of 1.40.
- Net margins of more than 13 percent.
- Positive levered free cash flow of $12.61 billion annually.
What The Bears See
- An expensive PEG ratio of about 3.5 (a PE of 13 and estimated EPS growth of 3.8).
- A highly levered balance sheet: current ratio of 0.76, debt-to-equity ratio of 91.29 percent, $11.30 billion in cash versus more than $84.56 billion in total debt.
Technicians note that AT&T looks like it finished a short-term “abc” correction to the downside in the beginning of August. Now, they think T shares may be in the third leg higher of a five-move sequence to the upside, with targets at $40.89 and $42.03. Only a close below $34.17 would turn the technicians more skeptical on AT&T stock.
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