Key Points
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AT&T’s stock is down big this year and it’s near multi-year lows.
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Concerns over SpaceX disrupting its business have resulted in a steep decline over the past month.
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The telecom stock has normally been a stable investment, and its financials are strong.
- 10 stocks we like better than AT&T ›
Shares of AT&T (NYSE: T) have been under pressure this year, down 17%. The stock is trading near its 52-week low despite the company’s recent financial performance being strong. Concerns about Space Exploration Technologies (also known as Spacex) taking market share and luring away customers with Starlink appear to be weighing on the telecom stock of late.
Earnings are on deck for AT&T, with the company’s second-quarter numbers due to come out on July 22, which could calm investors’ fears. Could it be a good time to buy the stock before then, while its valuation is low and its yield is high, at around 5.4%?
Could a strong earnings report fix what ails AT&T’s stock?
AT&T is a slow-growing business. It isn’t likely to generate double-digit growth in a quarter unless it’s due to an acquisition or some surprise development. In the first quarter, which covered the first three months of the year, its revenue was up just under 3% year over year. And that’s the kind of growth the company is forecasting for its service revenue this year: low single-digits.
That doesn’t, however, mean that the stock can’t surge if it delivers strong results, as it did back in January when it posted an earnings beat.
T data by YCharts
Big moves, however, aren’t the norm for AT&T, for what’s typically a fairly stable, low-volatility stock to own. What is encouraging is that there also haven’t typically been large declines after earnings, either. And with plenty of bearishness seemingly priced in due to SpaceX and to how its Starlink business may impact AT&T’s growth, expectations may already be low — and that could work to the advantage of investors who buy AT&T stock today.
Is AT&T’s stock a steal of a deal right now?
Due to its sharp decline in price, AT&T’s stock is now trading close to a multi-year low. Its price-to-earnings multiple of seven is also far below the S&P 500 average of 25. While slow-growing telecom stocks don’t normally trade at high multiples, it’s still a fairly low valuation for a quality stock.
AT&T provides some attractive value for investors, plus, with a high-yielding dividend, the stock could be a great deal today, as the market may be overreacting to the risk from Starlink, which still could have a long way to go in taking enough subscribers from AT&T to truly put a dent in its business. For long-term investors, buying AT&T stock before earnings may prove to be a good, low-risk move to make right now.
Should you buy stock in AT&T right now?
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
