AT&T Turnaround Play?

AT&T has shocked investors when they posted revenues that are slightly below expectations, but FCF of $1bn has fallen short by $1.5bn, compared to $2.5bn of their projected estimates. Although management has assured investors that they are still on track of achieving the full year guidance, investors are still spooked by the sudden decline in quarterly estimates.

A silver lining is that AT&T’s wireless business has seen an increase in subscribers and revenue, which signify that their investment in expansion of 5G network has paid off. The growth of their wireless business has helped to offset against other business lines that are not performing like their entertainment group (consisting of satellite TV) and broadband business.

Management, however, does not seem to be competent given that they have missed FCF expectations for several quarters, and even make reduction in their projected estimated last year. By having such a huge FCF miss in their first quarter of the year, management should expect investor’s trust in them to be wavering. Considering that the FCF would be under scrutiny by shareholders / analysts, management should have ensured that they at least meet their expectations for the first quarter.

Nonetheless, there might be an overreaction from the stock market if management will meet their full year FCF guidance of $16bn and that the Q1 miss was due to timing difference of their capital expenditure. Hence, this may pose an attractive buying point for investors that are looking for a quick turnaround play.

https://www.cnbc.com/2023/04/20/att-shares-sink-after-company-posts-softer-than-expected-revenue.html