With shares of AT&T (NYSE:T) trading around $37.44, is T an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
AT&T is a provider of telecommunications services in the United States and worldwide. Services offered include wireless communications, local exchange services, and long-distance services. AT&T operates in four segments: Wireless, Wireline, Advertising Solutions and Other. The communications products offered through AT&T’s segments reach audiences using just about every widely adopted medium: Internet, voice, television, and mobile. As consumers continue to adopt this technology, giant providers like AT&T stand to see rising profits. Look for AT&T to continue its dominance as consumers and companies aim to communicate quickly, easily, and efficiently.
T = Technicals on the Stock Chart are Strong
AT&T stock is in a downtrend that extends back to price highs established in late 1999 and early 2000. The stock has seen a surge higher since the Financial Crisis, however, it is now bumping up against the long-term downtrend. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, AT&T is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of AT&T options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| AT&T Options | 14.42% | 10% | 8% |
What does this mean? This means that investors or traders are buying a very low amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Steep | Average |
| July Options | Steep | Average |
As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very low amount of call and put option contracts and are leaning neutral to bearish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Mixed Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on AT&T’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for AT&T look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 11.67% | -39.59% | 3.28% | 10% |
| Revenue Growth (Y-O-Y) | -1.46% | 0.23% | -0.06% | 0.25% |
| Earnings Reaction | -5.02% | 0.8% | -0.82% | -2.11% |
AT&T has seen mixed earnings and revenue figures over the last four quarters. From these numbers, the markets have been a little disappointed with AT&T’s recent earnings announcements.
P = Poor Relative Performance Versus Peers and Sector
How has AT&T stock done relative to its peers, Verizon (NYSE:VZ), Sprint Nextel (NYSE:S), Comcast (NASDAQ:CMCSA), and sector?
| AT&T | Verizon | Sprint Nextel | Comcast | Sector | |
| Year-to-Date Return | 11.24% | 23.20% | 28.84% | 16.30% | 16.31% |
AT&T has trailed in relative performance, year-to-date.
Conclusion
AT&T provides communications products and services to growing consumers and companies across the nation. The stock has seen a modest run over the last several years but is now bumping up against a long-term downtrend. Earnings and revenue numbers have been mixed which have mostly disappointed investors in the stock. Relative to its peers and sector, AT&T has been a poor year-to-date performer. WAIT AND SEE what AT&T does this coming quarter.
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