AT&T (T) is a global, diversified telecommunications company. It’s the type of stock that stays with families for generations. If a cautious investor had to pick a stock to hold for decades, T stock would be as good a choice as any.
After all, AT&T is an American icon. From old telephones to modern telecommunications, this company has always stayed on the cutting edge.
There are valuation-related concerns, which we will address in a moment. Still, AT&T is doing reasonably well on the financial front – and the company continues to offer generous payouts for its loyal shareholders.
I am bullish on AT&T stock. (See Analysts’ Top Stocks on TipRanks)
A Quick Look at T Stock
So, let’s talk about AT&T’s sweet, delicious dividend yield. On an annualized basis, it’s a very healthy 8.2%.
Among mega-cap stocks, that’s hard to beat nowadays. No wonder people buy and hold T stock for many years, and pass it on to their kids and grandkids.
However, we can’t pretend that T stock is a perfect investment. There’s a valuation-related concern that might surprise you.
The share price has declined quite a bit over the past six months. In fact, T stock has fallen from $32 in May, to the low-to-mid $25 range in early November.
Given that downturn, one might assume that AT&T stock would be super-cheap right now.
According to a traditional valuation metric, though, it’s hard to argue that T stock is a bargain.
Currently, AT&T’s trailing 12-month price-to-earnings (P/E) ratio is 192.2.
Therefore, even after the recent share-price decline, investors will definitely want to see some improvement in AT&T’s earnings.
A Mixed Picture
Speaking of earnings, AT&T released its third-quarter financial results not long ago.
The top-line result was disappointing, but only slightly. AT&T generated $39.9 billion in revenues, which barely missed the average forecast of $40.6 billion.
Also, that result was 5.7% below the $42.3 billion generated in the third quarter of 2020.
Turning to the bottom line, however, we can see a brighter picture. In 2021’s third quarter, AT&T posted earnings of 82 cents per share, easily beating Wall Street’s average estimate of 64 cents per share.
Moreover, that figure was more than double the 39 cents per share recorded during the comparable period in 2020.
So, the mixed picture really wasn’t too bad, especially if we assume that bottom-line earnings are more important than top-line revenues.
Bringing Wireless Connectivity to the People
While we’re citing statistics, here’s another one: AT&T’s Prepaid Portfolio member, Cricket Wireless, has grown to a whopping 12.4 million subscribers.
That includes the addition of more than 2 million subscribers in just two years.
Cricket Wireless is an affordable way for people to get surprisingly fast mobile connectivity.
It’s a significant part of AT&T’s business, as not everyone can afford expensive phone plans.
Reportedly, Cricket Wireless has removed the 8 Mbps speed caps on its monthly plans of $30, $40, and $55. Therefore, a faster connection should now be available to more customers.
Even better, the company added 5G network access to every plan. This should make Cricket Wireless even more competitive in the affordable mobile phone plan market.
Wall Street’s Take
Turning to Wall Street, AT&T has a Hold consensus rating, based on three Buys, five Holds, and one Sell assigned in the past three months. The average AT&T price target of $30.75 implies 21.2% upside potential.
The Takeaway
In 2021, it’s great to know that AT&T still pays out generous dividends.
Granted, T stock doesn’t have a low P/E ratio. This might be a concern for value-focused investors.
On the other hand, AT&T is doing fairly well on the fiscal front.
Plus, the company continues to offer attractive phone plans for practically everyone, and going forward, this should stand AT&T in good stead.
Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.
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