AT&T Trading forecasts and signals

The market the day beforeOn April 11, the main American stock markets showed a downward trend. The S&P 500 adjusted by 1.69% to 4413 points, the Dow Jones dropped by 1.19%, the Nasdaq fell by 2.18%. Investors' favorites were "value" stocks. All 11 sectors of the S&P 500 closed in negative territory.Company newsVeru (VERU: +182.3%) announced positive results of a phase III clinical trial of the efficacy and safety of the oral drug sabizabulin against COVID-19.A final agreement has been concluded to acquire SailPoint Technologies (SAIL: +29.2%) Thoma Bravo at a price of $65.25 per share.AT&T (T: +7.7%) completed the allocation of WarnerMedia on April 8.We expectOn the eve of the reporting season and amid the tightening of the Fed's rhetoric, the main topic for investors remains inflation, which has reached its highest level in a decade. It is expected that the March retail sales data on Thursday will reflect an increase of 0.6% mom, although BofA economists noted only a moderate increase in the indicator, which does not include the cost of buying cars and buying gas, by 0.2%, emphasizing that at the moment there is a tendency to reduce costs, especially among consumers with low income. This is largely due to the increase in gas prices due to increased geopolitical tensions. Against the background of high inflation, the market is closely monitoring the actions of the regulator to determine the potential impact of monetary policy on the indicators and quotes of issuers. Earlier, several Fed officials, including Tom Barkin from Richmond (MarketWatch), emphasized the relationship between the pricing policy of companies and the more aggressive pace of tightening of the PREP. While most analysts expect supply chain pressures to begin to ease in the coming months, FOMC member Lael Brainard recently noted the impact of rising inflation in the service sector as consumers actively reduce spending.Trading on April 12 on the sites of Southeast Asia ended in different directions. China's CSI 300 rose by 1.95%, Hong Kong's Hang Seng added 0.42%, Japan's Nikkei 225 declined by 1.81%. EuroStoxx 50 has been losing 1.54% since the opening of the session.The yield of 10-year treasuries rose to 2.78%. Brent crude futures are quoted at $100.8 per barrel. Gold is trading at $1958.2 per troy ounce.In our opinion, the S&P 500 will hold the upcoming session in the range of 4360-4460 points.MacrostatisticsToday, data on annual inflation in March will be published (forecast: 8.4%, previous value: 7.9%), as well as monthly inflation excluding the dynamics of food and energy prices (forecast: 0.5%, previous value: 0.5%).Sentiment IndexThe sentiment index dropped to 45 points.Technical pictureThe S&P 500 overcame support at the level of the 200-day moving average. The RSI is at a neutral level, and the MACD signals the development of a corrective movement. The benchmark may find the nearest support at the Fibonacci levels, but the short-term downward movement may continue to the range of 4300-4340 ...

The market the day beforeTrading on February 1, the main American stock indexes ended in the green zone. The S&P 500 rose 0.69% to 4,546 points, the Dow Jones added 0.78%, the Nasdaq rose 0.75%. Almost all the industries included in the S&P 500 closed in the black. The exceptions were issuers from the real estate sector (-0.74%) and utility companies (-1.28%). Representatives of the energy sector looked better than the market (+3.54%).Company newsUnited Parcel Service (UPS: +14.10%) increased quarterly dividends by 49%.Exxon Mobil's revenue (XOM: +6.4%) in October-December 2021 soared by 83% YoY, to $85 billion.AT&T (T: -4.2%) announced its intention to lower its annual dividend to $1.11 per share.ExpectationsAfter a turbulent January, the main stock markets are returning to growth. The change in investor sentiment may be due to encouraging comments from several Fed members who suggested that the regulator could keep the key rate at the same level at the next meeting. The enthusiasm of market players was also spurred by the strong quarterly results of such major corporations as Exxon Mobil and United Parcel Service. We believe that in the coming days, the reports of issuers of the technology sector will determine whether the trend of capital flow to "value" companies, characterized by strong fundamentals at an acceptable entry price, will continue.The debt market is gradually stabilizing. The yield of two-year treasuries remains at 1.16%. The same indicator for "ten-year-olds" rose by 1 bps, to 1.80%, and the yield of 30-year securities rose to 2.12%.Trading on the sites of Southeast Asia ended on February 1 mainly in the green zone. China's CSI 300 did not show significant dynamics, Japan's Nikkei 225 rose by 1.68%, Hong Kong's Hang Seng added 0.75%. EuroStoxx 50 has been growing by 0.45% since the opening of the session.Brent crude futures are quoted at $89.16 per barrel. Gold is trading at $1800 per troy ounce.In our opinion, the S&P 500 will hold the upcoming session in the range of 4530-4380 points.MacrostatisticsNo significant macro statistics are expected to be published today.Technical pictureThe S&P 500 continues to move above the 200-day moving average, breaking through the Fibonacci level of 0.5. The RSI is still growing, however, remaining about 50 points, which signals equal forces of "bulls" and "bears". The MACD indicator indicates the end of the downward movement, but there is no signal for a reversal yet. The nearest support is in the area of the 200-day moving average.In sightThe quarterly results of Meta Platforms Corporation (FB), formerly known as Facebook, will be published today. This is a very important report for the company, as it will reveal for the first time the financial results of the Facebook Reality Labs division (revenue and operating loss), which, in our opinion, may lead to an increase in FB quotes, as investors will get an idea of the actual marginality of the main line of business related to online advertising revenue. According to consensus forecasts, the consolidated revenue of the corporation will show an increase of 19% YoY, to a new historical maximum of $33.4 billion. EPS on an annualized basis will not change much at the same time. Investors are also waiting for an increase in the active daily audience of FB by about 200 million users, up to 1.95 billion. According to FactSet, the next options assume the volatility of the paper in the range of 7% of the current price. We will be waiting for Meta management's comments on the impact of changes to the privacy policy in the iOS operating system on advertising revenue. This will help you understand what quarterly results can be expected from the social networks Twitter (TWTR) and Snapchat ...

On December 21, the media reported that Microsoft (MSFT) had agreed with AT&T (T) a deal to acquire the Xandr division of the seller company, which manages the online Community platform for buying and selling consumer—oriented digital advertising. Another AT&T product, Xandr Invest (the central hub for buying advertising, launched in 2019), allows advertisers to buy premium-class advertising at AT&T-owned facilities, such as the CNN, TBS and TNT television networks. In addition, Xandr provides an opportunity for customers to promote their products and products through streaming services and mobile devices, as well as on Vice Media, Hearst Communications, Newsy, Philo, Tubi, Xumo, Vudu, and Bloomberg platforms. After some time, Xandr Invest plans to start providing customers with access to live advertising, and you can purchase this service directly on the platform, without contacting the direct sales department.The second activity of Xandr is to provide analytical tools for evaluating the financial and operational results of the company.According to the data reuters.com , the division can be attributed to niche players with a small market share (<5%). According to Axios estimates (made in the middle of this year), Xandr's revenue is about $ 300-380 million (it is possible that by the end of 2021 the value will approach the upper limit of the forecast). Microsoft and AT&T did not disclose the value of the transaction, but according to siliconangle.com in the middle of the year, its price could be about $1 billion (despite the fact that AT&T spent about $1.6 billion to create a division).One of the reasons for the sale of the division was AT&T's large liabilities: the company assumed a huge debt for the purchase of Warner Media, and the sale of non-core assets will help pay it off. The second reason was the fact that Xandr was initially compromised by the connection with AT&T and HBO Max, since many potential advertisers were reluctant to use an application that is a competitor for their advertising purchases, that is, the platform can become much more profitable if it does not depend on AT&T. The third reason is the change in the advertising market due to the rejection of cookies by the industry, which complicated Xandr's operations. In fact, in the context of the allocation of AT&T streaming assets, the transaction looks logical: the bulk of Xandr's revenue came from advertising on TV and in the streaming services of the seller company.Microsoft, in turn, acquires this asset in order to strengthen and consolidate the advertising division, which is significantly smaller than the market leaders (Google, Meta, Amazon). According to the results of the last fiscal year, Microsoft generated about $8.5 billion in advertising revenue, which accounts for the Bing search engine, as well as LinkedIn and Xbox. The acquisition of Xandr will help diversify advertising revenue: the platform has already demonstrated strong dynamics of advertising revenue in the video and CTV (Smart TV) segments in the first quarter of 2021.With effective management of Xandr, Microsoft can get a part of the actively growing DSP (Demand-Side Platform) market, which, according to Market Insight Reports, will expand from $9.8 billion in 2019 to $30.5 billion by 2027 (CAGR 32.5%). Double-digit growth rates in the medium term can rather be considered an optimistic scenario for Xandr, since its EV/S multiplier may be about 3.4-3.8, which is an order of magnitude lower than the same indicator of The Trade Desk (40). However, taking into account the scale of Microsoft and its extensive network of counterparties, we assume that the growth rate of Xandr will be 20-25% until 2027, while sales will increase to $1-1.3 billion. We do not exclude that Microsoft is acquiring Xandr, among other things, to strengthen its assets in the advertising segment, so the net cumulative effect may be ...

Since the beginning of the year, AT&T shares have fallen by 6%. This happens under the condition of good forecasts from the management for the next few years, in which, apparently, market participants do not really believe. Here it is worth considering the fact that in recent years the company has suffered due to large-scale M&A deals with DirecTV and Time Warner. They not only distracted managers from the process of managing the main business, but also complicated the financial assessment of the issuer, since it became much more difficult to compare financial results with previous periods.It can be noted that DirecTV has a negative impact on financial results. While the rest of the divisions recovered from the pandemic: total revenue increased by 7.6% yoy, to $44 billion, while DirecTV's revenue decreased from $7.4 billion last year to $6.6 billion in the second quarter of 2021. AT the same time, AT&T's revenue is still below the pre-coronavirus values: in the fourth quarter of 2019, the figure was $46.8 billion.AT&T reports simply do not show any signs of strong growth in the near future. HBO Max will lose 5 million users who have subscribed to the service through Amazon. The company decided to do without intermediary services and will now encourage people to subscribe directly. Firstly, such a large reduction in subscribers will definitely affect the results. Secondly, the management plans to attract people with a 50% discount for the first six months of the subscription. In general, this strategy has a chance of success and can increase revenues, but in the medium term it is clearly impossible to do without financial ...

AT&T presented a strong financial report for the second quarter: the volume of consolidated revenue amounted to $44 billion. Last year, this figure was lower – $41 billion, but in 2019, before the whole story with the coronavirus, it was $45 billion.Earlier, the company predicted an increase in the number of American subscribers of HBO Max to 38 million by the end of 2021, while preliminary calculations expected their number to increase by 2 million per year. However, already now the number of subscribers in the United States has reached 47 million, and “global” – 67.5 million. At the same time, by the end of the year, the management expects to increase this figure by 2.5-5.5 million.The question arises – is AT&T really worth putting an end to the development of a rapidly growing direction? WarnerMedia's revenue increased by $2.1 billion y/y, to $8.8 billion. An additional 5 million subscribers of HBO Max are able to increase the total annual revenue by about $700 million. However, in the coming years, the company will be busy with the issue of closing the deal with Discovery and solving integration issues, while competitors will develop their own services with might and main.The company is revising the forecast values up, but we need to keep in mind that it is expected not faster business growth, but its recovery after 2020, because the fresh revenue values are still lagging behind the pre-crisis ones. A similar situation is observed for Verizon, which means that AT&T does not increase its market share, but at best retains ...

AT&T shares are trading 20% below the marks of the beginning of 2021 and 40% lower than in January 2020. The problem is that management cannot reduce the huge debt of the company in any way, while additional sources of costs appear on a regular basis.Players in the field of wireless communication have to constantly spend money on buying licenses for frequencies in the required ranges. At recent auctions from the band (C-band), AT&T and Verizon spent a lot of money to reduce the lag behind T-Mobile in terms of 5G networks. Verizon spent $45 billion, and AT&T spent $23 billion. In pursuit of greater girth, companies are overpaying compared to other players: the most recent bid at the auction was $8.8 billion, which is higher than T-Mobile (second place) - $6.6 billion. Pressure is also increasing from DISH Network, where they spent $5.3 billion to launch a competing 5G network.The situation is aggravated by the fact that AT&T does not earn any money from the acquired assets. Wall Street does not expect any changes in this direction at least in the next 5 years. Thus, 5G is transformed from one of the most powerful growth drivers for the industry into a black hole, where a huge amount of borrowed funds flies away. Moreover, this $23 billion does not include the cost of ”upgrading" equipment to be able to work with a 5G network. The telecommunications giant spends much more than it accumulates: by the end of this year, an FCF of $25 billion is ...