AT&T Is Going Nowhere But Up

AT&T (NYSE:T) is the largest provider of mobile telephony. In 2011, Forbes listed AT&T as the 14^th largest company in the world by market value and the 9^th largest non-oil company in the world by market value. AT&T Inc. provides telecommunications services and next-generation TV innovations to consumers, businesses, and other providers nationwide with the help of its subsidiaries.

AT&T’s mission is to exploit technical innovations for the benefit of its users and itself through implementing next-generation advancement and technology in its services and operations.Recently, AT&T became the second largest U.S. wireless carrier, serving 89 million customers and 12 million e-readers.

VALUATION

With a current stock price of $38.17, AT&T’s value increased by 0.36%. This growth may signify an expensive investment, but in substance it is a bargain. P/E is high at 50.89 times which surpassed analyst’s expectations. Forward P/E is 14.79 times while price to free cash flow is 39.14 times.

Analyst’s mean target price at $36.14 is clearly outmatched by the current stock price. The price is 46.57% of 52W low and -1.06% of the 52W high. We expect the stock to climb following the release of the recent iPhone 5 and the pending release of Nokia and Samsung’s flagship smartphones.

REVENUES AND DIVIDENDS

The five-year dividend history of AT&T shows consistency of payments and generosity to its shareholders. Since 2007, dividend amounts have been increasing from 1.42 to 1.72 in 2011. AT&T declares and gives out dividends every quarter. Its dividend yield is also one of the leaders in its industry with a percentage of 4.61. AT&T’s healthy payout ratio of 232% during last 12 months implies its generous dividend payment.

2011 was an extremely healthy year for AT&T. Despite the decline in its quarterly sales growth, the figure derived still creates an increment when compared to its previous year. AT&T’s growth machines are its wireless and wire line data; managed services; and its newest technology, the U-verse.

CASH FLOW AND EARNINGS

AT&T cash flow is not truly stable. Its free cash flow growth at the end of 2011 until the 1^st quarter of 2012 is -5.98%. However, its days sales outstanding is only 39.2 days compared to 41.98 last year. Its receivable turnover is only 9.31 times. The latest debt over equity of 0.62 during the latest report is low compared to the last quarter of 2011, which is 0.58. However, its financial leverage has been consistent at a bracket of 2.0. Therefore, AT&T’s debt issues are manageable, and its excellent leadership can keep up with its debts.

Every corporation has an issue. A minor downturn is now on the hands of AT&T. It failed to acquire T-Mobile due to federal blockage of the takeover which incurred a loss of $4 billion. Tough competitors such as Verizon (VZ) and Sprint (S) are also a threat, but its fast growth has not yet impacted the operations of AT&T greatly. Among the two, Verizon has greater edge in competing closely with AT&T but the threats are not worrisome to AT&T. On the other hand, there is reasonable doubt that Sprint will be able to sustain because its iPhone subscription is not hugely profitable. Currently, AT&T is still the leading provider of iPhone users.

RECENT NEWS

The demand for AT&T’s Mobile Enterprise Platform (MEAP) is on the rise during 2011 up to the current year. More than 27,000 of its valued customers have already adopted its newest mobile applications and to prove that, revenue for 2011 tripled. Furthermore, the forecast for the number of worldwide users of enterprise mobile application and service exceeds 600 million.

AT&T received a leadership award last May 2012 for its Wi-Fi innovation during the 15^th Annual Leadership Awards Ceremony. Wi-Fi connections of AT&T have started growing dramatically during the first quarter of 2012 with 626.4 million AT&T Wi-Fi connections, more than half of its 1.2 billion connections during the whole year of 2011. The Wi-Fi innovation is the strategy that AT&T’s senior vice president revealed to keep its customers connected anytime, anywhere, and whenever they need. AT&T assures the fast, reliable and convenient connection of its Wi-Fi. Additionally, AT&T is also optimistic that its Wi-Fi strategy will continue to skyrocket this year.

During February of 2012, AT&T started offering its Enhanced Push to Talk (PTT) solution. Since it has been particularly appealing to its users, the positive impact led AT&T to extend the free trial to its customers. In addition to that, AT&T has planned to offer five (5) smartphone choices to incorporate with its enhanced PTT, and that will include Samsung Mobile.

The two-in-one purpose of Toggle has never failed to impress its users. The latest version of Toggle can now be used on smartphones or tablets, including Android 2.2 and 3.X, and with virtually any service provider. The newest venture, U-verse has also been hugely alluring to the consumers. U-verse remarkable features are its fastest internet connection and widest cable service for televisions. All in all, U-verse garnered 6 million subscribers within a year.

Analysts are currently inclined to rate AT&T as a hold. On September 13 and 14, 2012, Hudson Square Research and Stifel Nicolaus downgraded AT&T from BUY to HOLD.

AT&T’s outstanding performance for the past years has left its competitors lagging. Needless to say, AT&T stocks are worth the investment after all. Its stock price is increasing to its full potential that it might be too expensive to avail in the near future. Its fast growth has gone out of its competitors’ control. AT&T’s management has indeed executed the best strategy for its company yet.