We came across a bull thesis on AT&T (T) on ValueInvestorsClub authored by Bill. VIC is our preferred site because the ideas there are generally posted by aspiring analysts who try to find holes in their own story. We find the ideas presented on the site well thought out and worth a serious consideration. Click here for the full article. Below we summarized the T bull thesis.
AT&T Inc. (T) is an American multinational mammoth conglomerate holding company headquartered in Dallas, Texas. It is the world’s largest telecommunication company, and the second largest provider of mobile telephone services. T is ranked 9th among the Fortune 500 companies, and is an S&P 500 Index constituent.
The analyst strongly believes T is an attractive risk/reward bet with significant upside. is grossly undervalued on almost all valuation metrics. He cited three main factors for the stock’s undervaluation on almost all valuation metrics.
- Misplaced Valuation Concerns : Wall Street seems to have not properly factored the newly rolled out streaming service HBO Max (HBOM), which should be accretive to T, and HBOM’s bright prospects. In comparison with the last 11 years’ Forward PE, Price to Book and Discount to S&P PE multiple, stock is trading at a discount on all three metrics. An average of all three yardsticks over the past 11 year versus the current metrics, T should be worth over $50.
- HBOM Underestimated: HBOM is currently one of the most sought after streaming platform, next only to Netflix and Disney Plus. The platform already has 30 Emmy Awards in 2020 under its belt (the highest among all platforms), and offers an extensive platter of content with broad streaming of several major league franchises. The initial teething problems during the launch now seem to be behind T. Launch of an international version of HBOM is also in the planning stage, which could add tens of millions of global subscribers. Although a small contributor to the company’s current revenue now, HBOM is poised for high growth thereby aiding the overall growth of T.
- Year-End Tax Loss Selling: As a large liquid blue chip stock, T has taken a bit of beating in the year-end tax loss selling. As the portfolio restructuring by investors is now out of the way, stock can resume its short as well as long-term growth path.
The new CEO John Stankey, slated to take the reins on 1 July, 2021, is expected to drive T’s expensive new 5G wireless network to profitability and optimize the HBOM platform for strong segment growth. Trading around 10-year lows at 9x FY21 P/E multiple, and a stable dividend yield of 7.3%, T offers an attractive buying opportunity.