Will AT&T 2x Your Money?
AT&T (NYSE:T) has been one of the top stocks for investors seeking dividend income for decades but its share price has languished. That could all be about to change because the telecom giant recently implemented a long-term plan to restructure its business model, which could in turn re-ignite its share price. Could AT&T double in price over the next few years?
The third quarter earnings report left investors with an optimistic outlook. AT&T beat analysts’ revenue estimates by $140 million, which led to an 8% share price rally.
In addition, management revealed the number of subscriptions had increased by 5.6%, the highest growth rate in over a decade.
What Makes AT&T a Good Investment?
AT&T is in a position to benefit from the rise of 5G technology and its newfound streaming dominance with Discovery.
The demand for its services should continue to increase as consumers look for ways to remain connected on-the-go and stay entertained. But what else could make AT&T worth investing in?
Strong Strategic Partners
Not only is AT&T focusing on the strength of its fiber and 5G services, but it has also been forging strategic partnerships to strengthen its offerings.
By partnering with Microsoft, Disney, and others, AT&T can offer customers even more content and broad access. This makes it a compelling choice for broadband services and entertainment options.
The Merge of WarnerMedia and Discovery
In 2021, AT&T merged its WarnerMedia division with Discovery (DISCA). This merger was created to shift the focus towards one of the largest industries in 2023: streaming.
AT&T already had a strong presence in the streaming market with HBO Max, but this merger has significantly increased its size and reach. The combined company will be able to offer consumers more content than ever before, including exclusive documentaries, original movies, and thousands of hours of classic television shows. The merger created an enterprise value of roughly $150 billion.
While the merger initially increased AT&T’s share price, it has dropped slightly. This can be attributed to the announcement of a dividend cut and management announced plans to limit the annual dividend payout ratio to between 40% and 43% of anticipated free cash flow.
Discovery has a significant portion of its viewership from global markets, and AT&T is expected to benefit from that. The strategic approach is to position HBO Max as a long-term winner in global streaming while offering lower prices than the competition.
Another advantage of the merger is the creation of a free online learning platform called “The Achievery.” This platform aims to give students access to virtual field trips and interactive educational games.
They are leveraging Discovery’s existing network to bring this platform to more than 140 countries. What makes this move by AT&T striking is not necessarily its effect on revenue but rather its focus on some of the most significant up-and-coming industry trends. E-Learning is a multi-billion dollar industry and is becoming increasingly vital, with distance learning and remote working common in today’s society.
Investing in 5G and Fiber Infrastructure
AT&T is anticipating nearly $24 billion in investments for 5G and fiber infrastructure in 2023. The company has been focusing on expanding its 5G network, which should result in faster speeds, more reliable connections, and better customer experiences.
This improved network should ensure it stays competitive and is widely expected to benefit the company’s bottom line over the long term by reducing expenses and increasing revenue.
The final reason for optimism in the long-term success of AT&T’s stock is its focus on sustainability by reducing its copper footprint.
The company’s top brass anticipates that 75% of its network footprint will be on fiber and 5G networks, decreasing the firm’s copper footprint by nearly 50%. The company also plans to reduce the number of products it offers in an effort to reduce emissions and promote its 5G network.
Should You Invest in AT&T?
AT&T is well-positioned for the future with its focus on streaming content, 5G networks, and sustainable efforts.
With its large customer base and great potential for growth in the coming years, AT&T is an attractive option for investors looking to buy into a blue-chip stock with an attractive dividend.
By our analysis, AT&T has 19.5% upside to $22.91 per share and pays an attractive 5.9% dividend for patient investors in the interim.