Investing Topics: Telecom Stocks

There’s no doubt AT&T Inc (NYSE: T) faces some steep challenges in early 2021. Just days before the company announced Q1 earnings last week, a Wall Street Journal piece featured the views of a prominent bear under the headline “Is AT&T a Train Wreck?” 

The company’s Q1 numbers and updated guidance, however, paint a far different picture.

Exhaustive reviews, impossible public interest standards and no guarantee of eventual success: That’s the consensus outlook for mergers and acquisitions activity under the Biden Administration. Nonetheless, utility M&A is alive and well.

The results are in for the most expensive wireless spectrum auction in US history. The question for the Big Two is whether their huge outlay will produce the revenue and cash flow to be worth it.

What’s a well-run fiber broadband network worth these days?

The top two companies that dominate this essential service industry have combined market capitalization of $440 billion and annual revenue of $300 billion plus, but still trade for an average of just 10 times expected 2020 earnings. They clearly suffer from the burden of low expectations.

Chronic share underperformance, weak Q2 operating results and still-heavy debt raise the question - is it time to sell AT&T (NYSE: T)?

After a robust decade and a half following 1996 deregulation, large US telecom M&A had virtually evaporated. The exception: T-Mobile US’ (NSDQ: TMUS) merger with Sprint, which closed April 1, 2020.

It’s no surprise that both the US and China’s political rhetoric is ratcheting up as the US approaches November elections. COVID-19 recriminations are just the latest catalyst for worsening what were already tense relations. Nonetheless, I’m staying with three Chinese essential service stocks.

AT&T Inc’s (NYSE: T) Q1 results answer two key questions about COVID-19 fallout and the telecom giant's resiliency.