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Competition has been winnowing away at AT&T Inc. (NYSE:T)’s market share and margins for quite some time as competitors like T-Mobile US Inc (NASDAQ:TMUS) and Sprint Corp (NYSE:S) have been slashing prices and offering unlimited data plans, and it doesn’t look like it’s going to let up anytime soon, especially with Comcast Corporation (NASDAQ:CMCSA) announcing it will be jumping into the fray with an unlimited-data plan of its own.
T is trying to stem the tide with both its recently announced acquisition of Straight Path Communications (STRP) — a firm that holds licenses to operate in portions of the spectrum that T says are going to be important for 5G data service — for $1.25 billion and its recently announced addition of HBO to its unlimited plan, but all of these things cost money, which is going to eat even further into T’s margins.
With the stock breaking down through a key up-trending support level at ~$40.50, we think it is going to continue falling in the run up to the company’s earnings announcement on April 25, after market close. We are watching support at $39.50 as our first price target and $38.50 as our secondary target.
‘Buy to open’ the T May 40 Puts (T170519P00040000) for a maximum price of $0.75.
Editor’s Note: The U.S. markets are closed on Friday for the Good Friday holiday, so we’ll be back with the next Trade of the Day on Monday, April 17.
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