AT&T (T) is one of the most recognizable wireless phone carriers in the U.S. The telecom and media conglomerate has been having a better year so far than it did last year. AT&T stock was down over 16% in 2021. In 2022, shares were trading higher initially but sold off heavily after a negative earnings report. On the positive side, the stock maintains a high 9% annualized dividend yield in a relatively low interest rate environment. Additionally, telecom stocks are sometimes viewed as a safe haven when stock markets turn volatile. Should investors consider buying AT&T stock?
Currently, the stock market is in an uptrend under pressure which means it’s not the best time to be buying stocks. However, it is a great time to identify top contenders for your watchlist. Investors should seek out leading stocks in leading industry groups that are outperforming the market. Investors should note that AT&T can be viewed as a defensive play because of its high dividends.
Now the question is, does AT&T stock deserve a spot in your portfolio or on your watchlist? Let’s look at AT&T from a technical perspective.
AT&T Technical Analysis
AT&T stock had a rough second half of 2021. Shares attempted to breakout from a flat base with a 31.99 buy point earlier in the year. But the breakout failed in late May when share gapped below the 50-day line in heavy volume. Shares of AT&T have since fallen below their 200-day moving average as well.
The stock’s been drifting lower over the past several months, and appeared to have reached on bottom on Dec. 15. Shares hit a low of 22.02 and have traded above this area since. AT&T stock successfully reclaimed its 50-day and 21-day lines inn January. But after investors reacted negatively to its earnings announcement on Jan. 26, shares have fallen back below these areas of potential support.
Additionally, the stock was turned away at the 200-day line, which acted as a key area of resistance.
AT&T stock maintains a low Relative Strength Rating of only 35, which is well below the minimum of 80 for ideal growth stock contenders. The RS line measures a stock’s performance against the S&P 500. Ideally, an RS line should be at or near a new high when a stock breaks out.
AT&T Stock: WarnerMedia, Discovery Merger
In May of 2021, AT&T agreed to merge its WarnerMedia business with Discovery (DISCA). The wireless service provider planned to merge its WarnerMedia business with Discovery in a deal that could close sometime within the second quarter.
Since then, the company has been deciding whether to spinoff or split the asset, while investors eagerly awaited the decision. “Both are great mechanisms for delivering value,” said CFO Pascal Desroches at a December conference. “And we’re not going to make the decision until we get closer to the time of the separation to ensure that we have complete information, including the relative share prices of the two entities.”
On Feb. 1, AT&T announced its official decision to spin off WarnerMedia to shareholders as a precursor to its merger. The stock fell 4.2% on the news.
“Heading into earnings, AT&T investors were favoring a split (vs. a spin-off), or an exchange of T stock for DISCA where investors have the option to swap T for new DISCA stock,” said Well Fargo analyst Eric Luebchow in a report.
The new entity will become Warner Brothers Discovery and trade under the ticker symbol WBD. AT&T shareholders will own 71% of the new media company, which will compete with Walt Disney (DIS), Netflix (NFLX) and others.
AT&T reported earnings on Jan. 26. Earnings for the December-ended quarter came in ahead of Wall Street projections. AT&T earned 78 cents per share on an adjusted basis, up nearly 4% from a year earlier. Revenue fell 10% to $41 billion including the divestiture of satellite TV firm DirecTV, but topped expectations.
AT&T in early January pre-announced wireless postpaid phone subscriber results for the period. The company added 880,000 postpaid phone subscribers, topping estimates of 804,000
AT&T’s recent promotional efforts were a big factor in boosting subscriber additions in the latter half of 2021. The wireless provider ran a promotion offering subsidies of up to $1,000 for new and existing customers buying a new Apple (AAPL) iPhone.
Is AT&T Stock A Buy?
AT&T stock should not be bought right now given the unstable market conditions and AT&T’s current technical set-up. I was also discouraging to see shares get turned away at resistance at the 200-day line. Also, investors want to prioritize stocks that have seen growth of at least 25% in earnings and sales in recent quarters. T stock currently falls far below that.
Despite its 9% dividend yield, AT&T stock is not one to be added to your portfolio right now. Investors will need to wait for the stock to form a better chart pattern and for market conditions to improve. Investors can check IBD stock lists and other IBD content to find the best stocks to buy or watch.
Follow Fox on Twitter at @IBD_RFox for more commentary on the best stocks to buy and watch.
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