Playing catch-up
I can somewhat understand the reasoning behind a bet against telecom services giant AT&T Inc. (NYSE:T), because in terms of next-generation wireless services, Verizon Communications Inc. (NYSE:VZ) is running circles around its peers. Verizon Communications Inc. (NYSE:VZ) is covering far more active 4G LTE-capable cities than AT&T Inc. (NYSE:T), Sprint Nextel Corporation (NYSE:S), and T-Mobile combined, which gives it an inherent advantage in acquiring new customers. In AT&T Inc. (NYSE:T)’s latest subscriber figures, we saw these struggles become apparent as it did add 296,000 new net subscribers during the quarter, but actually lost 69,000 high-value phone subscribers.
However, who in their right mind would bet against the inelastic pricing dominance of AT&T Inc. (NYSE:T) or its incredibly steady cash flow? We’ve witnessed AT&T Inc. (NYSE:T)’s commitment to catching Verizon with its plans announced last year to spend $14.4 billion on wireless infrastructure upgrades over the next three years. Although the trickle-down effect of these infrastructure upgrades tends to help network-equipment providers long before we see any follow-through in service providers, make no mistake about it: AT&T will see these benefits soon enough.
AT&T is also getting increasingly optimistic about its future. The company is forecasting net additions of 500,000 subscribers in the second quarter, which would be a nice improvement. With a 5% yield and a product that borders on necessity, this isn’t a company I’d recommend betting against.
Foolish roundup
This week’s theme is all about whether or not the business is healthy. Forget the dividends and the buybacks; can the business grow? For Albemarle Corporation (NYSE:ALB), that question is still unanswered, while plenty of question marks could exist for Newcastle, too. In AT&T’s case, its pricing power and wireless upgrades look poised to provide the growth needed to drive its share price even higher for years to come.
What’s your take on these three stocks? Do short-sellers have these stocks pegged, or are they blowing smoke? Share your thoughts in the comments section below.
The article Shorts Are Piling Into These Stocks. Should You Be Worried? originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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