Sign InAT&T Inc. (T) Sees Significant Price Increase with Mixed Outlook, Stock Evaluation Rated 'Hold'
Summary
AT&T's stock price showed a significant increase and is currently in a solid upward trend, however, technical analysis suggests that it may be overbought in the short term; fundamental concerns such as negative earnings per share and the sustainability of dividends make the stock a 'Hold'; investors should monitor the upcoming earnings announcement for potential impacts on the stock's direction. (Date of analysis: January 15, 2022)
Technical Analysis
AT&T Inc. (ticker: T) closed the last trading day at $17.47, experiencing a significant price increase of 1.87% from the previous day's close. The Relative Strength Index (RSI) presents an overextended picture at 73, suggesting that the stock may be approaching overbought territory. In contrast, the 50-day and 200-day moving averages of $16.25 and $15.97, respectively, indicate a solid uptrend in the short and medium term. The recent movement is notably above these averages, underscoring bullish momentum.
The MACD, a measure of short-term trend and momentum, is positive at 0.03, suggesting that the bullish sentiment still holds in the near term. The stock's volatility, gauged by the Average True Range (ATR) at 1.62, indicates that AT&T has displayed substantial intraday price movements, which could attract traders looking for dynamic price action. The current stop-loss recommendation at approximately $16.73 provides a threshold below which an exit strategy might be considered should the stock reverse its recent gains.
It is important to note there is no immediate resistance level, as the stock has not tested new highs. The observed support at $16.57 may provide some price stability. The trading volume was moderately lower than the average volume, suggesting that there might not be significant momentum in the short term to push the stock much higher without further catalysts.
Fundamental Analysis
AT&T's current earnings per share (EPS) is at a concerning -$1.51, resulting in a negative price-to-earnings (PE) ratio of -11.57, which can signal either a distressed company or a temporary setback if the company has a strategy to return to profitability. The stock's market cap stands at approximately $124.91 billion with a moderate dividend yield of 1.60%, which is relatively lower compared to some of its high-dividend peers.
Investor sentiment appears optimistic, with an analyst consensus reflecting an overall 'Buy' recommendation, supported by 13 'Buy' and 1 'Strong Buy' ratings against 4 'Hold' ratings. Despite the cautious fundamental indicators, the consensus target price is $26.90, showing expectations of significant upside potential. The upper target suggests a ceiling of $41, revealing a bullish outlook from some analysts. The upcoming earnings announcement on January 24 could serve as a significant event that may alter the stock's trajectory based on the disclosed financials and future guidance.
Relevant news includes a bullish stance from an investor who has allocated a sizable portion of their portfolio to AT&T, suggesting a contrarian but confident strategy in the company's future. Articles discussing high dividend yields point out the attractiveness of such stocks for passive income, a category in which AT&T has historically been included, though its current yield has decreased. Recent reports highlighting the poor performance in the telecom sector suggest a turnaround strategy that may be underway for AT&T.
Stock Performance Predictions
Considering the technical bullish signals and the mixed fundamental perspective, the forecast for the next trading day and the upcoming week is cautiously optimistic. The overextended RSI indicates short-term pullbacks may be likely, although the solid upward trend could prevail. If the company can present convincing strategies during its earnings announcement, or any positive news is released prior, the stock could continue its upward momentum. Otherwise, a consolidation around the current levels or a slight dip due to profit-taking from the recent gains could be expected.
Overall Stock Evaluation
Given the technical analysis indicating a bullish trend but also signs of a potential pullback due to an overbought RSI, mixed with the fundamental concerns related to negative EPS and questions about the sustainability of the dividend amidst transformation challenges, the stock is currently evaluated as a 'Hold'. The 'Hold' recommendation is corroborated by acknowledging the upcoming earnings announcement, which calls for a watchful approach as new financial information may have a substantial impact on the stock's direction. Investors should keep an eye on company developments and the reactions post-earnings release to reassess their positions.
