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AT&T Shares Up on Minimal Coronavirus Impact Expectations

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AT&T Inc. (T - Free Report) recently debriefed investors about the progress of the company on various metrics, while offering an update on the probable impact of the deadly coronavirus outbreak on its performance. The interaction with John Stephens, senior executive vice president and chief financial officer of the company, seemed to soothe investors’ nerves as share prices moved up 3.3% to close at $35.85 yesterday.

Coronavirus Impact

AT&T has administered necessary precautionary steps within the organization for the welfare of its employees and to pre-empt the spread of the contagious disease. Allaying investors’ fears, Stephens observed that the company expects to witness no significant impact from the coronavirus outbreak. However, in the same breath, he maintained that it would not be prudent to assuage the same on behalf of any specific supplier.

5G Momentum

The company remains well poised to continue its 5G momentum as it brings the tally of 5G coverage to 80 cities across the nation to date. Its 5G service entails the utilization of millimeter wave spectrum for deployment in dense pockets, while it intends to deploy 5G on mid- and low-band spectrum holdings in suburban and rural areas. AT&T believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices.

Streaming Focus

The company is also focusing on streaming services with AT&T TV and the soon-to-be-launched HBO Max. This is likely to create other avenues to monetize content while increasing ARPU (average revenue per user) through higher customer adoption. Powered by Android TV set-top box, AT&T TV offers a plethora of live TV channels, 500 hours of DVR storage space and 40,000 on-demand titles that can be streamed on a mobile device anywhere in the country. This is likely to enable users to either stream their favorite content on-the-go or record innumerable shows to watch later.

HBO Max will offer about 10,000 hours of premium content, leveraging an extensive collection of exclusive original programs and the most sought-after shows from WarnerMedia’s vast portfolio of beloved brands and libraries. With an unrivaled bouquet of premium and exclusive content for an impressive direct-to-consumer experience across the age group, HBO Max will likely equip AT&T to play catch-up with avant-garde media firms like Netflix, Inc. (NFLX - Free Report) and The Walt Disney Company (DIS - Free Report) to secure a bigger pie of the streaming service market.

Fiber Connectivity

Stephens envisions significant growth opportunities for the company with extensive fiber connectivity and bundled offerings for businesses and consumers. AT&T also anticipates gaining a competitive edge over rivals through edge-computing services that allow businesses to route application-specific traffic, where they need it and where it’s most effective — whether in the cloud, the network or on their premises.

Share Repurchase Program

AT&T is scheduled to retire $4 billion worth of stock under its two accelerated share repurchase agreements. The company expects to retire about 250 million shares through April 2020. At the same time, the company remains focused on reducing its huge debt burden to achieve a net debt-to-adjusted EBITDA ratio in the 2.0x to 2.25x range by the end of 2022.

We are impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock, which has rallied 17% over the past year compared with the industry’s growth of 8.4%.

A better-ranked stock in the broader industry is Qualcomm Incorporated (QCOM - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Qualcomm has a long-term earnings growth expectation of 19.5%. It delivered a positive earnings surprise of 10%, on average, in the trailing four quarters.

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