To say the past year or so has been an eventful one for AT&T Inc. (NYSE:T) would be a considerable understatement. It’s been a surprisingly wild year, with AT&T stock falling from a high above $43 in July of last year to a low near $35 last month, only to see it bounce back to over $39 recently.
I’ve got a feeling, though, the stock’s weakness has run its course and that we’ll see the AT&T stock price start to meaningfully rise from here.
There are three key drivers behind this brewing upside that deserve a closer look.
For the sake of full disclosure, I own a decent-sized position in AT&T stock. But just for the record, I’d still be pointing these things out about the company whether I was a shareholder or not. It just so happens that my ownership has prompted me to remain intimately familiar with the company, which in turn has allowed me to pass some extra perspective along.
On with the show….
AT&T’s Time Warner Deal Is Almost Done
The proposed pairing with Time Warner Inc (NYSE:TWX) isn’t consummated yet, and technically speaking it could still be upended. But after the long journey the two companies have already made down that road, it doesn’t appear much will be feasibly able to stop it now. From here, we can start to look at how AT&T will benefit from the deal.
In short, the wireless telecom giant gets access to a huge library of video content; it already owns the pipe through which it will be conveyed.
It is the newest trend in telecom, as the lines between the medium and the media are continually blurred. For instance, Verizon Communications Inc. (NYSE:VZ) now owns Yahoo, and Discovery Communications Inc. (NASDAQ:DISCA) is on the verge of owning Scripps Networks Interactive, Inc. (NASDAQ:SNI). By buying Scripps, Discovery CEO David Zaslav is increasingly trying to sell content directly to consumers. AT&T is simply building a company that can provide a one-stop content-delivery solution, as it has with DirecTV.
AT&T Stock is the 5G Leader
Though investors and consumers have heard a lot about it, they’ve yet to actually see 5G wireless internet connectivity. That’s about to change though, largely courtesy of AT&T.
As I opined in September, though most wireless telecom players are doing something to stake their claim in the 5G connectivity arena, it’s AT&T that appears to be the most forward-thinking of the bunch. It’s not just installing the proper hardware to make 5G possible. It’s anticipating how businesses and customers will want and need to utilize these high-speed connections, and developing services before would-be customers even realize they have the need.
It’s not just businesses, however. AT&T is ready to roll out 5G speeds to consumers as well. Just within the past few days, smartphone maker LG put its 5G-ready LG V30 phone on shelves at AT&T stores, and it’s capable of connecting users with a true 5G transmission right now in a handful of markets.
AT&T is going to be one of the first to commercialize this new technology, paving the way for the Internet of Things.
On the one hand, the two companies teaming up could create formidable competition, bringing a credible threat to the oligopoly currently enjoyed by Verizon and AT&T. On the other hand, by bringing the number of wireless players down from four to only three, AT&T has one less competitor to fend off, and the industry may simply become a less competitive oligopoly.
I’m going to trust the market’s reaction. Did you see what happened to AT&T stock on the same day T-Mobile and Sprint were rumored (once again) to be on the cusp of a merger late last month? T stock jumped quite nicely, suggesting traders see more upside than downside if this merger happens.
And if for some reason T-Mobile and Sprint don’t merge, Sprint is withering away all the same. One way or another, this is eventually going to be a three-horse race.
Bottom Line for AT&T Stock
Sure, as a stockholder of AT&T, it’s a little self-serving to sing its praises. But I’d be praising AT&T even if I didn’t own the stock. In fact, I have been recognizing AT&T’s opportunity prior to my purchase, and I suspect I’ll still be singing their praises after I’ve made my exit.
This doesn’t necessarily mean AT&T stock is the right pick for you. But if you’re looking for a wireless telecom name to fill a spot in your portfolio, I certainly can’t imagine any other of these names being as compelling as T stock .
As of this writing, James Brumley held a long position in AT&T. You can follow him on Twitter.