AT&T, a telecommunications giant, saw its shares stumble by up to 6% on Friday, prompted by market speculation regarding the potential divestiture of its 70% stake in DirecTV. This stake, co-owned in a joint venture with TPG established in 2021, currently carries a valuation of $16 billion. The move to consider divestment comes as DirecTV’s financial health has shown signs of deterioration, highlighted by a significant decline in cash distributions to AT&T and a loss in subscribers.
During the first half of 2023, cash distributions to AT&T from DirecTV witnessed a substantial drop, falling by nearly $1.885 billion, representing a year-on-year decrease of 30%. Additionally, DirecTV’s subscriber base experienced a notable reduction, with approximately 400,000 subscribers lost, bringing the total count down to approximately 12.4 million.
Despite the current turbulence, AT&T maintains a significant presence in the Diversified Telecommunication Services industry, boasting a market capitalization of $103.31 billion, as reported by InvestingPro Tips. This resilience underscores the company’s ability to adapt to dynamic market conditions.
AT&T’s unwavering commitment to its shareholders stands as one of its key strengths. According to InvestingPro Tips, the company has upheld dividend payments for 40 consecutive years. With a dividend yield of 7.63%, AT&T continues to reward its shareholders, demonstrating steadfastness amidst recent challenges. This dedication to shareholder value, combined with a robust free cash flow yield, positions AT&T favorably to navigate the current storm.
The swirling speculation surrounding AT&T’s potential divestment from DirecTV has introduced uncertainty into the future prospects of the satellite TV service provider. The possibility of divestment looms after the conclusion of the three-year commitment to the joint venture with TPG, set to expire on July 31, 2024. Such a divestment could signify a strategic shift for AT&T, potentially directing the company’s focus more squarely on its core wireless and broadband operations.
InvestingPro’s real-time metrics reveal that AT&T’s revenue for LTM2023.Q2 stands at $121.44 billion, accompanied by a gross profit of $71.51 billion, reflecting a gross profit margin of 58.89%. Despite a slight negative revenue growth rate of -0.27%, the company has managed to maintain a positive quarterly revenue growth of 0.92%.
InvestingPro’s fair value estimate for AT&T currently sits at $18.62, offering potential upside for investors from the previous closing price of $14.55. For further insights and tips, investors are encouraged to visit InvestingPro, a valuable resource offering a plethora of additional information and real-time metrics.
