NYSE:T
$25.34
(2/9 3:04PM)
+1.4%
| Open | $25.18 |
Mkt Cap | $147.4 Billion |
| High | $25.4 |
52Wk High | $28.73 |
| Low | $25.05 |
52Wk Low | $21.44 |
| Volume | 24.5 Million |
Avg Vol 10D | 38.3 Million |
T Stock Evaluation
Looking at T since last week, there has been little movement in price on a percentage basis. Additionally, there haven't been significant revisions to earnings estimates for T. Given this, we are maintaining our Undervalued rating. While there may not have been any meaningful changes in either price or earnings outlook, we still want to analyze where T is in relationship to its historical fundamentals. Looking at the ratios and multiples described below and throughout this report is the best way to evaluate the strength of T's current Undervalued rating.
Recommendation Summary
We are reaffirming our rating on T as of this week’s report. While we firmly believe that valuing companies based on fundamentals is very useful, we are careful not to view historical valuations in a vacuum. It is foolish to believe that a stock will always revert to historical norms. So, although there is value in historical norms, they only tell part of the story. When the market or a sector breaks through strategic thresholds such as standard deviations of historical pricing multiples, we find it necessary to view history with a grain of salt as a new reality may be dawning.
In general, when sectors, in this case the Telecom sector, have underperformed the market we often tend to be more hesitant to recommend stocks in that sector. However, even though the stocks in Telecom have appreciated 23.1% in the last twelve months, we believe that T is not quite due for an upgrade. Please see the full report of underlying research for more of our rationale of keeping a rating of Undervalued for at least another week.
Beginning with price changes, since our last report dated 01/30/2010 the price of T has decreased by 0.47%, but this does not greatly change our outlook on T.
Also, there have been no meaningful adjustments in earnings expectations to report in the last week.
T Revenue
Cash earnings is the most important factor in our analysis, but it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, T the high and low end of the Price to Sales per share ratios are 2.35x and 1.59x respectively.
Notice that T's current Price to Sales per share ratio is 1.21x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $25.24, T is 39% below where we would expect to see it. This will beneficially factor into our final analysis of T as it is not often that this stock sinks to these levels.
T Cash Earnings
As the old saying goes, "Cash is King!" We look at reported Cash Earnings, but the main emphasis of our analysis involves stripping out non-cash events such as depreciation from our cash earnings analysis. This helps us view the cash flows more clearly. Nevertheless, an analysis of Cash Earnings (both reported and otherwise) is absolutely pivotal to assessing a company's value, and currently T is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for T, the current level of Cash Earnings compared to its historical levels helps identify where T is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 8.29 and a historical low Cash Earnings per share ratio of 5.62, an investor can relate where value becomes optimal.
So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for T? From the Ockham perspective, we are looking specifically at T to see if the market is recognizing the huge disparity between T's past stock price to Cash Earnings ratio to today's levels. At a difference of 33% below the average historical Price to Cash Earnings ratio, our view would be quite positive at this point. However, as with all metrics, we need to also take other factors into account when looking at T. While we view better Cash Earnings metrics as very important, if the market is slow to identify this value, or if Cash Earnings were to fall from these levels, we would become more neutral in our stance.
T Dividends
While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.
In T’s case, the estimated annual dividend is $1.68 resulting in a current dividend yield of 6.66%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from T against the historic high and low levels over the past 10 years. The highest dividend yield from T over this period was 7.84% while the lowest dividend yield was 1.92% If you are looking for some “bang for your buck” then a dividend yield of 36.48% above the historical median should be enticing. T receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.
Tech Trader Daily-Barron's Has the Latest News on T
AT&T, Incorporated is one of the thousands of companies that Ockham has news analytics on, and it was recently discussed on Tech Trader Daily-Barron's.
In comparison to the other stocks that we follow, AT&T, Incorporated has seen more discussion in relation to its normal ranking among the group. Be aware that the news sources we track are focusing on this stock more often these days. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey. At present, Ockham has a valuation stance of Undervalued on T, as we could see significant price appreciation based on current fundamentals like cash earnings and revenue.
“… The debate rages on: will Apple (AAPL) allow AT&T (T) to maintains its exclusive hold on the iPhone? Earlier today, I noted that Bernstein Research this morning raised its rating ... …”
Tech Trader Daily-Barron's: Is AT&T, Incorporated Able to Constrain Costs?
A news report on AT&T, Incorporated's cost structure occurred recently on Tech Trader Daily-Barron's, so investors should take note.
Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey. In comparison to the other stocks that we follow, AT&T, Incorporated has seen more discussion in relation to its normal ranking among the group. Be aware that the news sources we track are focusing on this stock more often these days. At present, Ockham has a valuation stance of Undervalued on T, as we could see significant price appreciation based on current fundamentals like cash earnings and revenue.
“… Barclays Capital analyst Vijay Jayant today repeated his Equal Weight rating on AT&T, while trimming his 2010 EPS forecast to $2. 19 from $2. …”
AT&T, Incorporated News Appeared on Tech Trader Daily-Barron's
As always, the latest news on T is available to Ockham clients through RazorWire, and it was mentioned recently on Tech Trader Daily-Barron's.
Based on our methodology, AT&T, Incorporated should hold some appeal to value investors as we view it as Undervalued. Ranking all stocks in terms of news coverage offers some interesting data. In the case of T, it is getting significantly more attention in recent news coverage than we are used to seeing. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey.
“… Moffett notes that both Verizon and AT&T (T) underperformed the market over the last 12 months, as the market recognized “the immense challenges facing the telecom sector. …”
Tech Trader Daily-Barron's Discussed Dividends and T
For income investors, dividend news is obviously important. T's dividends were discussed recently on Tech Trader Daily-Barron's.
When looking at our entire coverage universe and ranking stocks by the attention they receive on RazorWire, it is clear that AT&T, Incorporated has been talked about more than normal recently. We consider T as Undervalued at the current price of $25.14. According to our methodology, this stock has appreciation potential based on current fundamentals which only improves if earnings or revenue surprise. The Motley Fool CAPS data suggests that investors believe AT&T, Incorporated will beat the market in the foreseeable future.
“… The Bernstein analyst says falling capital investment has resulted in higher free cash flow at both Verizon and AT&T, giving both stocks more free cash flow support than a year ... …”
Fast Money: Topics Include Emerging Markets and T
There is no doubt that the emerging markets are where the growth is right now. The latest news mention of T on Fast Money was in relation to emerging markets.
At present, Ockham has a valuation stance of Undervalued on T, as we could see significant price appreciation based on current fundamentals like cash earnings and revenue. In comparison to the other stocks that we follow, AT&T, Incorporated has seen more discussion in relation to its normal ranking among the group. Be aware that the news sources we track are focusing on this stock more often these days. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey.
“… verizon and AT&T continue to be under pressure. Lot of thoughts the different depth would support these stocks. These stocks act terrible. > > rsx was down 2%. …”
AT&T, Incorporated News is Being Covered Right Now on Power Lunch
The latest news from business television and influential blogs is always available through Ockham's RazorWire, and this news is in relation to AT&T, Incorporated.
The Motley Fool CAPS data suggests that investors believe AT&T, Incorporated will beat the market in the foreseeable future. We consider T as Undervalued at the current price of $25.21. According to our methodology, this stock has appreciation potential based on current fundamentals which only improves if earnings or revenue surprise. When looking at our entire coverage universe and ranking stocks by the attention they receive on RazorWire, it is clear that AT&T, Incorporated has been talked about more than normal recently.
“… Travelers, AT&T, walmart and dupont are among the dow's 30 winners. > > ppl beat the street. The ceo will join us first on cnbc. Tyson foods smashing analysts' estimates. …”
Notice a Discussion Covering T Appeared Recently in the Financial News
News has broken via the television and viral blogs regarding T, so investors should take an interest in learning what was said.
In comparison to the other stocks that we follow, AT&T, Incorporated has seen more discussion in relation to its normal ranking among the group. Be aware that the news sources we track are focusing on this stock more often these days. At present, Ockham has a valuation stance of Undervalued on T, as we could see significant price appreciation based on current fundamentals like cash earnings and revenue. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey.
“… Kvaal expects the company to launch new Android-based phones this quarter at AT&T, Verizon and possibly T-Mobile. The analyst contends that the company’s target of 11-14 million ... …”
Tech Trader Daily-Barron's Discussed T in Relation to M&A Activity
While we do not know the details relating to T and any possible deal, our RazorWire news analytics has noticed a mention of the stock near a conversation about M&A activity.
Based on our methodology, AT&T, Incorporated should hold some appeal to value investors as we view it as Undervalued. Crowd sentiment is leaning to the bearish side, according to the robust data set collected by the Motley Fool CAPS survey. Ranking all stocks in terms of news coverage offers some interesting data. In the case of T, it is getting significantly more attention in recent news coverage than we are used to seeing.
“… ” As for the potential for other bidders, McCormack writes that he is “highly skeptical” that AT&T (T), Verizon (VZ), Sprint (S), T-Mobile (DT) or America Movil (AMX) or other ... …”
Merger Talk with T on Tech Trader Daily-Barron's
While we do not know the details relating to T and any possible deal, our RazorWire news analytics has noticed a mention of the stock near a conversation about M&A activity.
In comparison to the other stocks that we follow, AT&T, Incorporated has seen more discussion in relation to its normal ranking among the group. Be aware that the news sources we track are focusing on this stock more often these days. At present, Ockham has a valuation stance of Undervalued on T, as we could see significant price appreciation based on current fundamentals like cash earnings and revenue. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey.
“… AT&T or Verizon? Likely wouldn’t get regulatory approval. I. e. , too big. Sprint? Incompatible network technologies; too. …”
Fox Business Has the Latest News on T
AT&T, Incorporated is one of the thousands of companies that Ockham has news analytics on, and it was recently discussed on Fox Business.
In comparison to the other stocks that we follow, AT&T, Incorporated has seen more discussion in relation to its normal ranking among the group. Be aware that the news sources we track are focusing on this stock more often these days. At present, Ockham has a valuation stance of Undervalued on T, as we could see significant price appreciation based on current fundamentals like cash earnings and revenue. Crowd sentiment is favorable on this stock, as measured by the Motley Fool CAPS survey.
“… Last but not least credit suisse says that apple will remain exclusive with AT&T and the iphone at least through 2011. That is longer than what most people out there on the ... …”