Where Will T Stock Go Following AT&T Spin-Off?

T Stock - Where Will T Stock Go Following AT&T Spin-Off?

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Despite selling off its media arm and shedding over 19.6% on Monday, AT&T (NYSE:T) could be on its way to a solid future with its current strategic moves and business focus.

It was unclear what precisely triggered the Monday selloff in T stock given that the deal was first announced in February 2022 but was only concluded on Friday. However, with an estimated $48 billion in new investments, plans to bring 5G to 200 million homes and expand its fiber footprint to 30 million locations by 2025, T stock will rebound once investors start digesting the company’s new initiatives and strategies.

A quick look into the company’s 2021 financial statement showed its core communication services: mobility, business wireline and consumer wireline are all growing. For instance, in the mobility unit, AT&T added 1.3 million postpaid customers in the fourth quarter and 4.5 million for the entire year. Operating income rose by 5.2% year on year to $5.4 billion while the operating income margin grew by 25.3% to bolster the unit’s earnings before interest, taxes, depreciation, and amortization (EBITDA) service margin, used in measuring the unit’s operating profit as a percentage of revenue, to 50.5%.

Business wireline also posted a strong operating income of 15.2% and a 37.5% EBITDA margin. The growth was broad based as consumer wireline added a net 271,000 AT&T Fiber customers.

Another thing that stood out for me in the company strategy was the fact that by divesting from U.S. video in the third quarter and Vrio in the fourth quarter of 2021, it was able to cut operating expenses from $56.4 billion in the 2020 financial year to $35.7 billion in 2021. This shows the management knew what they was doing when they decided to spin-off Warner Media to focus on AT&T’s core services and rein in its $156 billion debt.

Therefore, I expect T stock to rebound from the current decline as more people start comprehending the strategic move and robust plans for the future.

On the date of publication, Samed Olukoya did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samed Olukoya is a financial markets analyst with over two decades of experience. He founded Investors King and has worked with top business platforms across the world.


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