We recently published a list of Jim Cramer Stocks: 10 Latest Calls. Since AT&T Inc (NYSE:T) ranks 1st on the list, it deserves a deeper look.
Jim Cramer in a new program on CNBC talked about the latest pullback on Tuesday, when the market snapped its 8-day winning streak. Cramer said that the hopes of rate cuts were buoying the markets all along. According to Cramer, when a company posted a good quarter, its stock roared. If a company reported a bad quarter, investors assumed it was the “last bad quarter” because the Fed was about to start cutting rates.
“In other words, companies could do no wrong. But not today. Today we had a bit of a reckoning and dose of reality being thrown in our faces.”
Cramer talked about two home improvement companies that recently reported their quarters. According to Cramer, these results show that the consumer is still extremely cautious, and high mortgage rates and inflation is keeping spending on big-ticket items depressed.
“Wall Street is maybe expecting not good news from the Fed on Friday and therefore a slowdown, a bad slowdown,” Cramer said.
Jim Cramer said the market is “rational” again and the optimism needed to be “tempered” before the next rally.
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked 10 stocks he’s recommending investors to buy or sell. With each company, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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AT&T Inc (NYSE:T)
Number of Hedge Fund Investors: 71
A questioner asked Jim Cramer on CNBC whether he should let AT&T go or hold it.
“Let it go. There are a lot of better opportunities including by the way T-Mobile which is really a horse,” Cramer said.
However, some analysts believe AT&T Inc (NYSE:T) has learned from the mistakes of the past and now focuses on a few areas instead of trying to expand as a conglomerate. With DirecTV and TimeWarner now out of the way via spinoffs, AT&T’s key goal is to expand its 5G business. During the recently reported quarter, AT&T Inc (NYSE:T) saw a 2% increase in postpaid phone subscribers and a similar 2% rise in average revenue per user (ARPU), matching inflation rates. This demonstrates its ability to attract new subscribers in a saturated market, leading to growth in both revenue and EBITDA margins.
Analysts believe AT&T Inc (NYSE:T) is on track to reduce its debt to a net debt-to-adjusted EBITDA ratio of 2.5x by the first half of 2025, which should secure its nearly 6% dividend and boost shareholder returns.
On the financial front, AT&T reduced its net debt by $5.1 billion while growing EBITDA, with a low average interest rate of 4.2%, resulting in manageable annual interest payments of around $5.5 billion. Analysts believe AT&T Inc (NYSE:T) 2024 outlook remains strong, with 3% adjusted EBITDA growth, robust revenue, and significant capital investment for future growth.
With a solid single-digit P/E ratio and $17.5 billion in free cash flow, analysts believe AT&T Inc (NYSE:T) is well-positioned to cover its dividend and pursue share buybacks, making it an attractive option for patient investors.
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Disclosure: None. This article is originally published at Insider Monkey.
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