Is AT&T an Attractive Investment?

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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:

T = Trends for a Stock’s Movement

AT&T is a provider of telecommunications services in the United States and worldwide. Services offered include wireless communications, local exchange services, and long-distance services. AT&T operates in four segments: Wireless, Wireline, Advertising Solutions, and Other. The communications products offered through AT&T’s segments reach audiences using just about every widely adopted medium: Internet, voice, television, and mobile. As consumers continue to adopt this technology, providers like AT&T stand to see rising profits.

When it comes to super-fast gigabit broadband networks, Google (NASDAQ:GOOG) is the company you often hear about, thanks to its Google Fiber project. That may not be the case for long, though. On Monday, AT&T announced that it’s working to bring its AT&T U-Verse GigaPower fiber network to 21 metropolitan areas. What’s so great about gigabit Internet? It’s not just faster than the broadband many of us use today — it’s way faster. It offers speeds of up to a gigabit a second, which is roughly 100 times faster than what many broadband customers use today. According to a company press release, it’s fast enough to “download an HD online movie in less than 36 seconds, download 25 songs in one second, and download your favorite TV show in less than 3 seconds.”

T = Technicals on the Stock Chart Are Strong

AT&T stock has been range-bound over the past couple of years. However, the stock is currently trading near highs for the year and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, AT&T is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of AT&T options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

AT&T options

18.59%

73%

70%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Flat

Average

June Options

Flat

Average

As of Tursday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

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