AT&T Q4 Reaction: Not Out of the Woods Just Yet

&T Q4 Reaction: Not Out of
Cheyne Gateley/VIP+

AT&T is kicking off 2022 in the best way possible. It’s inching closer to a more focused business, and investors are loving it for now. Hopes for what’s to come are what’s driving optimism in the company and its stock; however, AT&T’s real troubles may actually just be beginning. 

It may be hard to believe given its struggles over recent years, but AT&T stock has solidly outperformed the broader market so far in 2022. Investors have been favoring value stocks over growth stocks this year as rising rates dampened investor appetite for riskier assets. 

After rising 2% pre-market Wednesday, AT&T shares pared those gains and opened the regular trading session lower. 

However, ahead of its Q4 earnings announcement, AT&T stock rose 4%, while the S&P 500 was down 9%. While that’s worth mentioning, it’s not necessarily anything to write home about either. Over the past twelve months, AT&T stock sank 10% compared to the broader market’s 14% gain, and in the past five years, AT&T shares tumbled 32% while the market jumped 92%.  

If there’s one thing CEO John Stankey and AT&T investors are both really looking forward to this year, it’s the completion of the WarnerMedia-Discovery merger. On the earnings call, Stankey said once the deal closes, “you’ll see us refine our messaging around our brand.” At least he is fully aware that AT&T had a serious identity problem. AT&T expects the WarnerMedia-Discovery merger to be completed by the end of Q2. 

AT&T, along with its rivals, are continuing to ride the industry-wide wireless and broadband growth. Yes, the media business is competitive but so is the telecom biz. AT&T is no doubt a leader in the wireless space; however, a lot of those gains were direct results of its aggressive promotions. The promotions produced lower churn, which resulted in higher net adds. While that strategy delivers great results, there are looming concerns of sustainability. 

A major test for AT&T will come once the magic of the promotional strategy fades. Though the days of 5G are somewhat new, T-Mobile has been the top ranking 5G provider in recent network tests with Verizon and AT&T trying to play catch-up. There’s so much for Stankey to get done like lowering debt, but none of it can be efficiently executed until WarnerMedia is officially off his plate.  

With its impending WarnerMedia divestiture, AT&T made it very clear that it would be committed to continuing to boost revenue in its core wireless business and cut costs this year. Investors earnestly want to believe that AT&T can turn things around and right its business wrongs. But it’s been a tough road as an investor, and there is just so much that Stankey and the management team need SHOW through action to gain back the trust of the investment community.