Financial Advisers Looking Closer at AT&T amid Earnings, Time Warner Merger Reports
Every week, TrackStar, the official newsletter of Investing Channel’s Intuition, looks at the most searched tickers among financial advisors and identifies what stocks caught their attention. Given that financial advisers usually provide investment advice and help their clients with determining the right stocks for their portfolios, it’s important to see what stocks they are looking into and identify potential catalysts that put these companies in their spotlight.
Last week, the most searched ticker was AT&T Inc. (NYSE:T), which has a number of developments that might affect the stock in both long and short-term. It was followed by three tech giants: Netflix, Inc. (NASDAQ:NFLX), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc (NASDAQ:GOOGL), which are generally always on investors’ radars. In general, last week’s list of the 20 most searched tickers was dominated by tech companies, with Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), eBay Inc (NASDAQ:EBAY), QUALCOMM, Inc. (NASDAQ:QCOM), and Microsoft Corporation (NASDAQ:MSFT) ranking among the top 10 most searched tickers. This could be explained by their financial reports scheduled for this week.
Meanwhile, the S&P 500 inched up by 0.30% between July 17 and July 21 and continued its gains in the first days of the current trading week, boosted by strong earnings posted by several large companies, including AT&T Inc. (NYSE:T). AT&T Inc. (NYSE:T)’s stock appreciated by 1.33% last week but is trading over 3% in the green on Wednesday after the company posted better-than-expected earnings for the second quarter on July 25 after the closing bell. The gains should help offset the stock’s 14% decline that was registered since the beginning of the year, as investors were worried about the company’s debt and pressure from competitors like Verizon Communications Inc. (NYSE:VZ).
However, the company’s last financial report may alleviate some of investors’ concerns. AT&T posted adjusted earnings of $0.79 per share, topping the consensus estimate of $0.74 and the year-ago figure of $0.72, although revenue of $39.89 billion declined by 2% on the year and was in line with expectations. Even though the revenue fell, a higher bottom line was achieved due to a drop in CAPEX spending. AT&T also maintained its full-year guidance, which includes adjusted EPS growth in the mid-single digits.
The telecom giant also said it added 2.80 million new subscribers in the wireless segment, including 2.30 million in the us and 476,000 in Mexico, while its US wireless segment registered a record postpaid phone churn (percentage of subscribers that stop using the service) of 0.79%. However, AT&T Inc. (NYSE:T) also lost 199,000 video subscribers net, including 156,000 subscribers in the traditional satellite segment on DirecTV, which it bought in 2015. The drop in video subscribers was offset by an addition of 152,000 subscribers to DirecTV Now, AT&T’s internet TV streaming service that was launched last November.
The addition of more internet TV streaming service subscribers is a positive thing for AT&T Inc. (NYSE:T), since the company needs to maintain subscribers amid massive cord-cutting trend. The upcoming merger with Time Warner Inc (NYSE:TWX), which owns CNN and HBO, among others, will offer AT&T access to lots of new content and can help it increase the number of subscribers to DirecTV Now.
The merger between AT&T Inc. (NYSE:T) and Time Warner Inc (NYSE:TWX), has also been in the public spotlight lately as it approaches conclusion. Even though it is generally expected that the $85 billion deal will go through, since AT&T and Time Warner are not direct competitors and don’t seem to pose anti-trust concerns, there are some bumps along the way. For one, president Trump is not very fond of CNN, as he attacks the channel whenever he has the chance, and might use the deal as leverage over the news network, according to a New York Times report. Democrats have also expressed concern over the White House’s potential intervention in the deal, but they are also worried that the merger will endanger competition and asked the Justice Department to consider blocking the deal. Other providers of online content, such as Netflix, can also be concerned that AT&T will have the power to favor its own service through slowing down access to their platforms, for example.
As stated earlier, AT&T’s stock has been falling lately, and is currently trading around multi-year lows. Nevertheless, the decline helped push the stocks dividend yield to over 5.40%, together with the last year’s dividend hike to $0.49. However, to maintain the same policy of stable 2% dividend increases, AT&T Inc (NYSE:T) needs its deal with Time Warner to go through, especially since there have also been talks that Verizon Communications, Inc. (NYSE:VZ) looking into expanding further in the content business after the recent acquisition of Yahoo! and could potentially buy Walt Disney Co (NYSE:DIS) or Netflix.