It’s no secret that AT&T (T) has benefited from its exclusive deal with Apple’s iPhone, which has been a gold mine for both companies. But T has been fraught with consumer complaints about the quality of its network.
And now Apple (AAPL) is making noises about opening up the iPhone to other carriers, most notably to dastardly Verizon (VZ), T’s bitter rival that loves to point out the limitations of T’s 3G coverage. Taking the iPhone trump card away from T could be a devastating blow, given how many of Verizon’s customers have been saying the same thing, “I’m just waiting for Verizon to get the iPhone.”
The Street isn’t expecting T to post much of an improvement over last year’s profit. But the whisper number is a couple of cents higher than the official consensus forecast, suggesting that expectations may be running a tad high. The stock hasn’t done very well after recent earnings, dropping the day after each of the past four reports.
On the chart, T has been in no-man’s land, trading between its flat 100-day and 50-day moving averages for the past month. The stock is currently at the upper end of this range, which could be a problem, especially given its recent weak post-earnings moves.
Sentiment toward T is surprisingly positive. Short interest in negligible and analysts are split nearly evenly between “buys” and “holds.” Not one “sell” among 32 analysts tells us that the Street is looking at T through rose-colored glasses. Frankly, we’re not sure what they’re looking at.
Options players are similarly optimistic, although that may be changing. Note in the chart below that the put/call is putting in a bottom after reaching an annual low (indicates a substantial preference for calls over puts). The last time the ratio bottomed at this level was in August, which marked a top in the shares (circled areas). Such a configuration does not bode well for T.
There isn’t much to like about T at this point. The fundamentals are shaky, the chart is weak and sentiment is unreasonably high. That sounds like a short in our book.
Have a great trading week.
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