AT&T Inc.: What Traders Expect From T Stock

AT&T is setting up for a substantial move following earnings

Dow Jones Industrial Average constituent AT&T Inc. (T) reports earnings Tuesday night, but in front of the release are there clues as to how investors will react in T stock?

AT&T Inc.: What Traders Expect From T Stock

Let’s take a look at AT&T’s recent quarterly announcements, the price charts for T stock and what, if anything, the options market are estimating in front of the earnings report.

AT&T’s Earnings Picture

In front of next Tuesday’s first-quarter earnings release, 26 analysts are forecasting profits of 69 cents per share for AT&T, with views ranging from 65 cents to 72 cents. The consensus estimate compares to last year’s same-quarter result of 63 cents and a profit increase just under 10%.

On the sales side, T stock’s revenues are expected to slip marginally to $40.9 billion compared to last quarter’s $42.1 billion result, but up handily from last year’s sales figure of $32.6 billion.

Short-Term Trading Record

Over the past couple of years, AT&T has managed a checkered pattern regarding earnings by beating Street views 41% of the time, matching 25% and missing estimates 33% of the time.

In the immediate aftermath of reporting reaction in T stock has proven to be a similarly up and down affair. Shares of AT&T have moved a varied 0.23%, -0.66%, 1.06%, 4.19%, -0.39% and -2.42% over the past several quarters.

The price moves in AT&T stock has produced an average and very narrow move of just 0.33%, but larger one standard deviation of 2.21%.

Notably more bullish, a seven-period stock performance calculation shows AT&T moving by 2.23% with a one standard deviation of 2.73% over the last six quarterly reports.

AT&T Stock Monthly Chart

Click to Enlarge
Source: Charts by TradingView

Shares of AT&T have rallied in recent months and participated with the market’s “risk-on” persona of late. T stock has also had the backwind of renewed interest by investors in high-yielding stocks. Nonetheless, AT&T has woefully underperformed in recent years.

Looking a bit closer at this time frame, T is now situated near its prior three-year highs after a modest pullback following last month’s fleeting breakout attempt.

AT&T’s chart could resolve itself as either a bearish double top or bullish cup-shaped base. As a strategist, I’m personally on the fence regarding T stock’s prospects as far as price movement. But what do options traders think of AT&T?

AT&T Stock Options Pricing

Heading into Friday’s second half, shares of AT&T are trading up 0.65% near $38. With two trading days remaining until Tuesday night’s report, options traders are pricing in a 68% chance T stock will remain within a range of $36.75-$39.40 through next Friday.

The math behind the AT&T range calculation is based on the weekly Apr 29 $38 straddle market, which is trading on implied volatility of 25%.

The pricing in the AT&T straddle is the purest play on the earnings event and tells us what traders collectively expect from T stock in the immediate aftermath of its quarterly announcement.

The expected dollar move up or down works out to about 3.4% by Friday’s close. That’s a good deal larger than AT&T’s recent one-session, immediate aftermath trading history.

On the other hand, the expected move, especially if it turns out it’s an upside reaction, would jibe nicely with AT&T’s detailed, substantially larger and more bullish seven-day stock performance.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.

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