With shares of AT&T (NYSE:T) trading around $36, 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:
C = Catalyst for a Stock’s Movement
AT&T is a worldwide provider of telecommunications services that include wireless, wireline, internet, television, and advertising solutions. The company is deeply involved in an industry that will continue to see growth from world expansion. AT&T is poised to profit from the continued rise in desire to interconnect by the world population.
T = Technicals on the Stock Chart are Mixed
AT&T stock has been struggling to see new prices over the years. A downtrend from highs established during the internet boom is still in tact. AT&T stock made an attempt at breaking above this downtrend last year but was met with increased selling. Currently, the stock is seeing a decent run this year, but a break above the downtrend would be more constructive…
Key simple moving averages can provide insight into the trend and strength of the trend. What are the key moving averages? The 50-day, 100-day, and 200-day simple moving averages. AT&T stock is trading above its untangling key moving averages. So, the stock seems to be gaining its footing before continuing on a strong uptrend.
A simple way to gain perspective into investor sentiment is through the use of the options market. More specifically, taking a look at the implied volatility and implied volatility skew levels of AT&T options may help determine if investors are bullish, neutral, or bearish. The implied volatility of AT&T options is at 17.32 percent today which coincides with a 66th percentile over the last 30 trading days and 60th percentile over the last 90 trading days. What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
The implied volatility skew of April and May put and call options is at about average. So as of today, there is an average demand from call and put buyers or average supply of call and put sellers, all neutral over the next two months. Investors are buying a significant amount of call and put option contracts and are leaning neutral over the next two months.
E = Earnings Are Mixed Quarter-Over-Quarter
Earnings and revenue growth expectations are important for a company stock but not as important for a mature company like AT&T. What do the last four quarterly earnings and revenue growth figures for AT&T look like? The last four quarterly earnings growth (Y-O-Y) rates have been: 3.28, 10, 5.26, and 6.24 percent while the last four revenue growth (Y-O-Y) rates have all been: 0.23, -0.06, 0.25, and 1.84 percent. AT&T has posted decent earnings and revenue growth rates over the last four quarters.
How did the markets like these numbers? The last four quarterly earnings announcement reactions help gauge investor sentiment on AT&T’s stock. The last four quarters have seen next trading session returns of 0.8, -0.82, -2.11, and 3.61 percent. The markets have had mixed feelings about AT&T’s last four earnings announcements.
E = Average Relative Performance Versus Peers and Sector
How has AT&T stock done relative to its peers and sector? Year-to-date, the stock is returning 3.3 percent while its competitors, Verizon (NYSE:VZ), Sprint Nextel (NYSE:S), MetroPCS (NYSE:PCS), and sector are returning 10.13, 1.55, 5.72, and 2.86 percent respectively. AT&T has been in the middle of the pack on this one.
Conclusion
AT&T provides products and services that will see increasing worldwide demand in the coming years. Earnings and revenue growth rates have not excited investors just yet so it has translated into a stagnant stock price. So, relative to its peers and sector, AT&T stock has been an average performer. WAIT AND SEE what AT&T does in the coming quarter.
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