After years of uncertainty and underperformance, things appear to be heading in the right direction for America's largest telecom operator, AT&T (NYSE :).
In recent months, the debt-laden telecom giant has been able to show that it is gaining momentum. The Dallas, Texas-based media company is on track to improve its portfolio, which could generate attractive returns.
Last month, AT&T announced that it would acquire its loss-making DirecTV business in a deal with private equity firm TPG. The move will create a joint venture in which TPG will be responsible for running DirecTV and AT & T's other pay-TV businesses.
Under this arrangement, AT&T will receive $ 7.6 billion in cash, while the new DirecTV will take on $ 5.8 billion in committed debt financing. With the sale, AT&T is closer to becoming a smaller, modern communications and media company with a clear focus on its wireless and streaming business.
AT & T & # 39; s video streaming company, HBO Max, is also taking shape after some uncertainty about its place in a market dominated by Netflix (NASDAQ 🙂 and Disney (NYSE :). AT&T said this month that it will release an ad-supported version of its HBO Max streaming service in June to capitalize on pent-up demand from marketers looking to reach the HBO Max audience.
70 Million Subscribers
Dallas-based AT&T is aiming to bring HBO Max to 60 international markets this year in an effort to expand its geographic reach. The goal is to boost HBO Max and HBO together so that they end 2021 with 67 million to 70 million global subscribers.
In December, the company surprised Hollywood when the studio division of Warner Bros. said it would release its entire line of 2021 theatrical films simultaneously in theaters and on the streaming service.
However, these encouraging signs do not hide the fact that AT&T has been a bad investment over the past five years, when the stock lost more than 20% of its value. Over the same period, the benchmark delivered a total return of 90%.
AT&T Weekly Chart.
John Stankey, the company's new CEO, believes that AT & T's HBO bet will pay off in the long run and investors should remain confident in its turnaround. Analysts Raymond James, as they upgrade the telecom giant's stock to outperform with a $ 32 price target, said in a recent note that the situation for the company will continue to improve over the next 12 months, turning the stock into a solid total return. .
The note was partially read:
"With HBO Max finally on the dominant hardware streaming platforms, we think the streaming service will see significant subscribers, and the stock should respond well to these gains."
The AT&T stock is up about 9% over the past month, closing out Monday at $ 30.57. It pays $ 0.52 per share each quarter, a dividend payout that translates to an annual return of 7%.
Bottom Line
The early success of asset sales and growing subscriber base for his video streaming business demonstrates CEO Stankey's ability to put AT & T & # 39; s house in order and unlock some value to its shareholders. But in our opinion, it is on a long road to recovery and it is difficult to see the stock showing tremendous upside potential after recent gains.
That said, AT&T remains a suitable candidate for investors looking for a steady stream of income through dividends.
