T stock forecast: A good call?

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Analysts split over AT&T share price forecast as firm moves ahead with WarnerMedia spin-off

The AT&T stock forecast is a study of a legacy company in transition. The company is staking a lot on its spin-off of WarnerMedia to tame its debt and focus on 5G. Some of its latest quarterly report figures were rather encouraging, however.

AT&T stock news offered upbeat reports, including for its industry-leading wireless divisionIts fourth quarter results came a month after significant news for the media division that it expects the deal to close in mid-2022. In late 2021, the European Commission said the deal passed antitrust regulators and the IRS delivered a favourable ruling to declare the merger tax-free for shareholders. Both were significant steps forward to help make the new company, Warner Bros Discovery, reality.

One figure that analysts consider when making AT&T share price forecasts is churn – the number of customers who are jumping ship to a rival provider. Across its mobile network, this churn figure stood at 0.76% for the year. The AT&T stock price forecast is also being helped by strong increases in HBO Max and HBO subscriptions, which reached 73.8 million, up 13.1 million year-on-year. At year-end, the domestic subscriber figure stood at 46.8 million, up 5.3 million. Total revenues from the WarnerMedia division increased 15.4% for the fourth quarter, to $9.9bn.

Said AT&T CEO John Stankey:

“A year and a half ago, we began simplifying our business to reposition AT&T for growth and we’re extremely pleased with how we’ve executed on that commitment. We ended 2021 the way we started it – by growing our customer relationships, running our operations more effectively and efficiently, and sharpening our focus. Our momentum is strong and we’re confident there is more opportunity to continue to grow our customer base and drive costs from the business”.

AT&T counted $168.9bn consolidated revenue for the year, compared with 2020’s $171.8bn. The difference reflects the spin-off of the US video business in the third quarter of 2021. When excluded, revenue was $153.2bn, compared with $144.6bn in 2020.

AT&T stock news included the mid-May 2021 announcement that AT&T’s WarnerMedia would merge with Discovery and spin-off in a deal worth more than $43bn.

Operating expenses were $20bn lower for the year, and net income came in at $19.9bn, or $2.76 per share. That showed a turnaround from 2020’s $5.4bn loss, or 75 cents a share.

“We’re at the dawn of a new age of connectivity," Stankey said. "Our focus now is to be America’s best connectivity provider and also ensure our media assets are positioned to grow and truly become a global media distribution leader. Once we do this, we’ll unlock the true value of these businesses and provide a great opportunity for shareholders”.

AT&T share price forecast 2022: What to watch

The WarnerMedia division saw revenue fall 10.4% to $41bn, mainly reflecting the sales of US video in the third quarter and Vrio in the fourth quarter.

TV licensing and theatrical spurred a 45% content revenue increase to $4.4bn. But advertising softened in the fourth quarter with a 12.9% fall to $1.6bn in 2021, the year after the ad-heavy presidential election.

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Another area of concern in the AT&T share price forecast centres on the levels of debt in the company. It totalled $177.4bn at the end of 2021, a reduction of almost $1.8bn.

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During the call with analysts that accompanied the release of the fourth-quarter results, Stankey outlined the progress of expense-cutting measures. He said more than half the target of $6bn in cost savings has been met and the proceeds reinvested into operations.

“As we expand our customer base, we'll continue to responsibly remove costs from the business. We have a clear line of sight to achieving more than two-thirds of our $6bn cost savings run rate target by the end of this year,” Stankey said. “And importantly, we expect the CD savings start to fall to our bottom line beginning in the back half of the year”.

AT&T stock: buy or sell?

Let’s wrap up with a look at the latest AT&T stock forecasts for 2022. Needless to say, with everything that is currently going on, it is a mixed picture.

According to CNN Business, the median view indicates the stock could go up by a third to $30 in the coming 12 months. The high-end AT&T stock price prediction projects the share price will jump to $37, while the most pessimistic view anticipates a decline to $19.

Eight analysts have a buy rating on AT&T stock, while two say it will outperform. Sixteen analysts recommend holding the shares, while only one has a sell rating in place.

It is important to remember that analysts frequently get things wrong. Always do your own research before buying stocks and never invest more than you can afford to lose. After all, share prices go down as well as up. 

Looking ahead, all eyes will be on whether AT&T can continue to trim net debt.

With a share price around $24 at the time of writing, AT&T’s stock is in a slump comparable with lows seen during the 2009 recession. It is around $8 lower than its 52-week high of $32.24 on 16 May 2021 and fell almost 10% after the results release. Rival Verizon’s price remains double AT&T’s.

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Right now, AT&T is a company that is pushing ahead with innovation while continuing to grapple with the decline in its legacy business. The continued success of its streaming offering – which is home to shows including Game Of Thrones, Westworld and Doctor Who – is going to be nothing short of essential. When that deal is done, sometime in mid-2022, it will afford AT&T the opportunity to accelerate 5G coverage in the company’s biggest markets. AT&T will be motivated to regain its fastest network in the US crown after finishing as runner-up to T-Moblie in the PC Mag 2021 test.

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