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Shares of U.S. telecom behemoth, AT&T Inc. (T - Free Report) slipped to a 52-week low of $35.58 during the trading session on Sep 7. However, the figure recovered marginally to close at $35.60, down 2.65% from the closing price on Sep 6.

Over the past 52 weeks, shares of AT&T have ranged from a low of $35.58 to a high of $43.03. The average volume of shares traded over the last three months is approximately 22.01 million.

Why the Downturn?

We are concerned about AT&T’s operation in a saturated wireless market, where spectrum crunch has become a major issue in the domestic telecom industry. Most of the carriers are finding it difficult to manage mobile data traffic, which is growing by leaps and bounds. The situation has become acute with the growing popularity of smartphones, online mobile video streaming, cloud computing and video conferencing services.

Apart from saturation issues, competition is intense in the domestic wireless postpaid and prepaid industry. The gap between prepaid and postpaid average revenue per user (ARPU) has narrowed significantly, forcing telecom biggies to turn their attention to domestic prepaid mobile service business.

Stiff pricing competition in the industry is a genuine concern. In this scenario, the entry of non-wireless cable giants, Comcast Corp. (CMCSA - Free Report) and Charter Communications Inc. (CHTR - Free Report) , has increased competition.

In order to counter competition, AT&T continues to offer several low-priced service plans and attractive promotional discounts, both for individual customers and business entities. Although such offers increase the company’s top line by adding customers, but the costs incurred during marketing campaigns and advertisements is likely to affect the company’s margins. This may further led to a high cash burn rate and heavy losses for these companies.

The company’s wireline division continues to struggle with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. In the last reported second-quarter 2017, total wireline broadband connections were 1.384 million, down 5.2% year over year. IP-broadband was pegged at 992,000.

Additionally, stringent regulatory measures and union issues are other major headwinds.

All these factors have led to the company’s share price hitting a new 52-week low.

Price Performance

AT&T has not been performing well of late. Over the past six months, shares of AT&T have declined 15.1% compared with the industry’s decline of 8.2%.

Moreover, when compared with the market at large, the stock’s performance is pretty dreary, as the S&P 500 index has rallied 4.5% over the same time span. 

Sales Estimates on a Downswing

We note that the sales estimate for AT&T has moved down for the remaining quarters of 2017 and also for full-year 2017.

Sales growth for third-quarter 2017 and fourth-quarter 2017 is estimated to decelerate 1.34% and 0.74%, respectively. Additionally, for 2017, sales are expected to drop 1.69%.

Earnings Surprise

AT&T does not have an impressive track record with respect to earnings surprise. This is because the company surpassed the Zacks Consensus Estimate only in the last reported quarter, while keeping in line with the same in the remaining three of the previous four quarters.

Zacks Rank & Stocks to Consider

AT&T carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Computer and Technology sector include Juniper Networks Inc. (JNPR - Free Report) , ADTRAN Inc. (ADTN - Free Report) and America Movil S.A. B. de C.V. (AMX - Free Report) . While Juniper sports a Zacks Rank #1 (Strong Buy), ADTRAN and America Movil carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

For 2017, EPS of Juniper, ADTRAN and America Movil is projected to grow 6.7%, 14.9% and 939.3%, respectively.

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