For those who are invested in or monitor AT&T (NYSE:T) stock, here are few interesting facts to chew on: For the first time since early 2017 — more than two and a half years ago — T stock’s 20-day and 50-day moving averages are both solidly above the 200-day moving average. Want more? For the first time since 2016, all three of those moving averages are also sloping upward.
In other words, in 2019, T stock’s 20-day moving average has broken above its 50-day moving average, both of those moving averages have broken above the 200-day moving average, and all three of those moving averages also have a positive slope. The last time a breakout like this happened? Early 2016. Then what happened to the AT&T stock price? The shares rallied from under $35 to nearly $45 — essentially the biggest upward move this stock has made in the past decade.
This is no coincidence. The fundamentals agree with the technicals here. Both are saying that AT&T stock appears to be in the early stages of a huge breakout rally which could materialize over the next 12 to 24 months.
As such, now seems like a good time to load up on T stock ahead of this breakout rally. Here’s a deeper look.
5G Boom will Meaningfully Improve Wireless Operations
The breakout bull thesis in AT&T stock rests on two big catalysts. The first of those catalysts is the forthcoming widespread roll-out of 5G connectivity.
5G promises to change the internet-connected world as we know it. On one hand, it’s way faster and way better, so everybody and their best friend is going to want to upgrade to 5G connectivity — and will be willing to pay up for that connectivity. On the other hand, it’s so much better that it will enable an entire new generation of internet-connected devices, and the expand the capability of those devices.
With respect to AT&T, 5G will do two critical things. One, it will increase AT&T’s pricing power and yield higher revenue per connection. Two, it will increase the number of connected devices on AT&T’s network. Higher revenue per connection plus more connections equals more revenue … and at higher margins, too.
The 5G roll-out will take time, meaning this isn’t a one-year tailwind. This is a multi-year tailwind. Over the next several years, then, AT&T’s wireless business will benefit from improved revenue and margin trends — and ultimately produce more profits than ever before. Those record profits will help spark a breakout rally in T stock over the next several quarters.
Streaming Pivot will Meaningfully Improve Wired Operations
The second of the big catalysts which should spark a big breakout rally in AT&T stock is that the company will finally embark on a viable streaming strategy in 2020.
AT&T’s forays into the streaming world to-date have not been all that successful. The company had DirecTV NOW, but that service has been losing subs over the past several quarters. HBO NOW and HBO GO have had some success, but each lacks the breadth of content necessary to become huge streaming services.
In 2020, though, AT&T is set to finally make noise in the streaming market. Specifically, AT&T is launching HBO Max in Spring 2020. Here’s how to think about this: HBO Max is to AT&T, what Disney+ is to Disney (NYSE:DIS). That is, HBO Max is AT&T’s all-in-one streaming service which could help this company finally move past cord cutting headwinds.
Just consider all the content that HBO Max will reportedly have – all the HBO shows like Game of Thrones and Pretty Little Liars; classic shows which AT&T now owns thanks to the Time Warner acquisition, like Friends and Fresh Prince of Bel Air; premium cable programming from Cinemax; DC Universe movies; and additional content from consumer favorite channels like CNN, TNT, TBS, trueTV, The CW, Cartoon Network, Adult Swim, etc.
In other words, thanks to the Time Warner acquisition, AT&T has amassed a content war-chest which is among the biggest, widest, and best in the industry. They are putting all that content into one streaming platform, and that streaming platform is set to launch next year.
Will it have big demand? Probably. And that big demand should help turn the narrative around here, from a negative cord-cutting narrative, to a positive subscriber growth narrative. That narrative pivot should help push T stock higher over the next few quarters.
Bottom Line on T Stock
AT&T stock has been a sluggish stock for several years. But, two big catalysts — the 5G boom and an aggressive streaming pivot — should breathe life back into this stock over the next 12 to 24 months.
Indeed, the technicals are hinting that T stock is in the beginning stages of a multi-quarter breakout rally. The fundamentals will confirm this breakout over the next few quarters.
As such, now looks like a good time to get bullish on T stock.
As of this writing, Luke Lango was long T and DIS.
