AT&T (T) Stock | Long Term Analysis | Overvalued or Undervalued |

Transcript (auto-generated)

Alright hello and welcome everybody to another stock analysis video where today we’re talking about AT&T ticker symbol T now this company is trading on the new york stock exchange and this is one of the companies that we’ve talked about quite a bit in the past but i do want to get into the stock a little bit more as some things have changed with the company’s trying to spin off world of media and also spinning off directv successfully so i want to talk about both those things as fail i also want to talk about the long-term growth of the company and also talk about the value of this company that would mean the intrinsic value the book value price turns and all that kind of stuff so stay tuned for that if you’re interested anyway if you like this video please do like subscribe because it’s about our channel and let’s get those content out to more people so that more people can understand how a t works and also all the stocks that we talk about work as well on our channel anyway thank you so much for watching without further ado let’s get started now of course att is a major telecom but they aren’t just any telecom they are kind of more interesting than just verizon or t-mobile or those kind of telecoms because this company offers a major demand and also works in numerous spaces they also work in the media space so they’re similar to like viacom cbs let’s say in the media space with a with their acquisition of warner media they acquired directv so this company has done very well just for the fact that the company has been at least trying to purchase companies and try to grow their business but unfortunately they way overpaid for these companies so i would think i would have thought that these companies would have done better for the company however unfortunately att has struggled with them because they weigh over pay at the beginning so that’s the unfortunate idea with atm t but if you look at some of their bundles that they’ve offered here with acquiring these companies this is where a t has also made quite a bit money they were able to bundle some of their att tv packages with a t internet and so this will allow them to charge more per month and so they would essentially acquire these customers in full instead of just allowing these people to then use att internet for one thing then maybe use another streaming service or maybe spectrum for their cable something like that and so att tv is something that att offers and that is allowed people to kind of stay with att for all their business in terms of the me getting again connected with the media internet and all that kind of stuff they also include hbo max and things like that which is really nice that’s due warner media so with directv and their warner media acquisitions they’ve at least been able to offer some of these bundles now just to be clear at t when they spun off directv they spun them off only thirty percent of the company so they still own seventy percent of directv they received eight billion dollars from tbg capital for spinning off thirty percent of the company to them but this company has been able to at least use that money to pay down their debt do all things like that so that’s been good for the shareholders another thing that i want to know is that the company still is able to at least use their att tv as a form of bundling with their services so att still is making plenty of money off of this and so even though directv has been losing subscribers for a consistently long period of time it is not all too bad att is still making money off of the company and so as time goes on i think if they can somehow turn things around i think that’ll be great i do not see a future for the cable business really all that much so it’s kind of debatable on whether or not i mean i think they should really just get rid of directv entirely but it’s so hard to do that at this point they’re having trouble getting buyers to pay for as much as they want them to and so therefore directv has only been spun off as a part of the company and not just the entire thing where the media however is going to be spun off in full so that’s going to be spun off completely into a discovery deal so the point is that warner media is going to get spun off with discovery and it’s going to be a 43 billion dollar deal so it’s worth a lot more money t now the acquisition of time warner was completed in 2018 and att acquired them for 85 billion dollars including debt and also with directv they acquired them back in 2016 and they spent 67 billion including debt and so they’ve spent a lot of money in the past for directv as well directv was 48 and a half billion dollars in cash but since the company came with debt that is where a t really spent more than that so that’s why this company has been blowing up on day a lot and so that’s certainly been an issue for the company too so these acquisitions have not been successful for the company however this has allowed att to at least offer a little more to their customers so in some parts it’s been nice but i definitely don’t think it was worth it by any means now i really want to get into the value of this company because that’s something that we really like to do in our videos we want to talk about the intrinsic value of the company we consider that based off of the projected free cash flow model of calculating the intrinsic value the company is at about 47 and 60 cents a share now we calculate that it’s a very simple way of calculating the intrinsic value of a stock we consider that is currently 47 60 cents like i said before the growth multiple here is essentially the growth of the earnings each year so this is like a percentage then you take that and you multiply that by the free cash flow this is a six year average of the free cash flow this is how you take into account the earnings into the intrinsic value and then you also add the total stock with exactly which is simply the assets minus the debt of the company then you multiply that by 0.8 to offset the growth multiple and then divide by the shares that’s saying in the market in order to get the intensify per share of the company so this is one way of calculating the intrinsic value there are many ways of calculating the autistic value but this is a specifically easy way and i think that this is a way that a lot of people can follow and it takes into account numerous technicals too there’s other intrinsic value calculations that you can make you can make up your own formula you can do all sorts of things but this one takes into account assets alongside their earnings and not just one or the other so it’s very important that we combine both of them into an intrinsic value and that’s why i like this one in fact the most now the company currently has a book value per share of 22.73 which is currently showing that the company has quite a bit of assets relative to the current trading price of the stock with the company having an intrinsic value of 47.60 that is traded that is well above the company’s current trading value of the stock so with a company currently trading at around 28 a share at the time of recording this would mean that the company is currently well undervalued with a company trading well below 47 a share that does currently suggest that the company is undervalued when the company spins off foreign media that means the assets of the company are going to decrease substantially and also the company’s demand income and other things like that are going to increase substantially so the point is that the company is going to likely decrease in value as time goes on based off of the lowering of the intrinsic value because the company’s gonna make less money and they’re gonna have less assets now things like that but you will receive shares of warner media when they do spin off the company so that’s very nice for the shareholders when they spell out directv since they weren’t spilling off the entire company the company really just received cash and then went from there with warner media however you can actually decide if you want to hold warner media or just sell it entirely so also you gotta make sure that this is warner media discovery so discovery is merging with this company so you aren’t just going to own warner media you’re also going to own discovery so you have to make a decision on that um we will talk all about that in a future video when things get closer to that but the point is that this company’s asset value is going to decrease now i do think that this will unlock some value for this company because the thing is is this company is still currently well undervalued based off of numerous technicals so if the company does do a full spin-off i don’t think that the shareholder value the trade value of the company is going to decrease as fast as some people may think it’s going to decrease it’s already decreased quite a bit now i understand it can decrease dramatically i get that it’s the stock market but i think that right now anybody who has really decided to sell out this company i think has probably already done it for maybe lowering their dividends and whatnot so i don’t see att’s value decreasing very much and i also don’t see att’s value decreasing very much and at very fast rate because 18t in general doesn’t move very much as a stock there’s a lot of shares that’s staying in the market and a lot of people who own the stock really just own it as a retirement demand stock so there’s very little volatility in the stock which is something that i really like because it offers great dividend income then also you can just relax and not have to worry about probably necessarily dropping you know 20 a day like the new robin hood ipo is doing so the lower volatility of the stock is really nice and also the lower volatility is a tribute to the book value being so high but the company has a really high book value that helps to keep the intrinsic value very high as well and since the if the earnings let’s say they dramatically change the book value is still supporting the intrinsic value so much that the intrinsic value is likely still going to remain above the current trading value of the stock so that isn’t going to encourage very many sellers to you know short the stock or many people to sell out the stock in general so i think that this company is still going to at least retain some value for the shareholders in the long term and not have very much concerns of volatility either now we consider that the company currently has a share of equity of about 180 billion dollars and this is very high but this company also has a really large amount of debt this company currently has 155 billion dollars worth of debt however they have taken the eight billion dollars they’ve begun from directv and they plan to use that money to pay down their debt as well also with the warner media spin-off they should receive approximately 43 billion dollars between cash and also securities in the deal from the warner media spin-off so this is definitely plenty of money that the company is going to receive and they can use this money to pay down a significant portion of their debt so the 8 billion is nice but the 43 billion dollars is substantially more so i think they can lower their debt hopefully down to maybe just about 100 billion dollars of worth of debt now i understand that they’re likely not going to do all that amount of money like they may keep some of the money for maybe investments in the future things like that but the point is that this company has definitely been willing to decrease the amount of debt that the company has because they’re right now the current new ceo has definitely been willing to ban for the shareholders he currently owns a lot of the stock and so the current att ceo is more willing to help out the shareholders i think at this point and this is primarily because the company is now trying to pay down some debt they’re also trying to get rid of some of their you know poor acquisitions and hopefully focus on their core business which is just being a telecom so a t is a great telecom i think they are the third largest in the nation and they are currently a really great telecom if you’re trying to maybe get unlimited plan that was something that was very recent that the company is offering a truly unlimited plan now if you want to take a look at that please do check it out it’s very interesting i’m not going to go into that in this video but the point is that a t is currently offering a lot of plans and that’s going to help to increase their net income now we can take a look their name come and consider that the company currently has an income of about negative two billion dollars a year now that is false right now in my opinion because at this point this is really because the company posted hr mac loss over one of the more recent quarters because they are taking into account the dramatic loss from directv and this is the reason why they posted approximately a 15.5 billion dollar loss and so this is really the company made about one half billion dollars but then they lost 15 and a half billion dollars they wrote it down from the directv loss and so as a result that is why the company currently has a loss shown for that recent quarter so i think when things stabilize the company is going to likely come out to maybe two to three billion dollars a quarter which will hopefully bring them back to approximately 10 billion or 11 billion dollars a year now that would give them a pretty low price to earnings and that is pretty nice for this company i think the price earnings may stay around 10 maybe 15 for this company i think that would be very fair for the company um i have seen that this company has high priced earnings that is as low as five and also has been uh you know maybe around six now things like that in the past so this company really every so often does have issues where the company’s price earnings is just dramatically lower than the company’s current trading value but this is really because the company has points where they’re posting significant gains and also posting significant losses so you consider that for the yearly income it may jump dramatically but then it’ll come down because this is over the course of a year that’s why it is dramatically up for these four bars this is over each quarter so each quarter here is profit substantially but that’s going to be down because that the quarter of that profit substantially is no longer part of the year anymore so that’s why this company currently at this point uh does have dramatic um changes in the company’s price earnings so definitely keep that in mind the price earnings is is relevant but not extremely relevant to the company’s current trading value as you can see here the company’s trading value hasn’t changed very much despite significant losses or stamping in gains now this company does do quite a few things in order to still benefit their shareholders so although this company may have a price earnings that is dramatic uh the company still has a really high asset value and they like to increase this book value per share of the company by buying outstanding shares now the company has authorized a lot of buyback programs for their shareholders and so they’ve been willing to spend approximately four billion dollars i think over this year to repurchase shares but the problem is that this company currently is not buying back their own stock even though they authorized a new share repurchase program we can see that the company’s outstanding shares have been actually increasing from seven point one eight three billion outstanding shares to actually 7.2 billion outstanding shares in the most recent quarter so this is quite interesting and this is really showing that the company although they’re putting out are authorizing sherry purchase programs this company is still not really willing to buy back their own stock and this is in part because the company has to spend so much money on their dividend now clear that this company currently offers a 7.4 dividend yield which is awesome especially for a telecom even even though a telecom is normally very high for a dividend this is still really really high so with att offering a 7.4 percent dividend yield that is very high and this has helped to keep the shareholder value for this company for many many years a lot of people will be able to take this dividend income and then just reinvest it back to the stock and then just grow their money steadily as time has gone on even though it may have been a more risky asset to own it would have likely outperformed the bond market and so if you own maybe a mutual fund in a you know a bond or something like that this stock would likely have outperformed that with their very high demand yield so that is certainly something that has kept a lot of shareholders in this stock and i think it’s been very well known that a lot of retirement portfolios contain a t and so for a dividend portfolio att was like would likely have been in it but right now things have definitely changed because as we can see here the company has actually had to lower their dividend cash flow so they’re lowering it from 15 billion to 8 billion because of them having to spin off warner media and this has caused a lot of shareholders to immediately exit the company because they notice that the shareholder value may decrease in the coming years because the problem is now this company instead of paying out a seven and a half percent dividend yield they may only be paying out a three and a half percent or a four percent dividend yield which is still awesome we say only as a figure of speech but the point is that this is still lower than the seven half percent dividend yield that they have approximately so this is something that i definitely want to note that this company is still lowering their demand by they aren’t going to lower their demand in that near of a term the company still has approximately a year or two before they officially spin off warner media into a separate entity and we hope that the warner media entity or the warner media discovery company is going to actually pay out dividends so we’ll see how that goes and as things get closer we’ll make an update video to talk about the warner media spin-off and other things like that so please stay tuned for that and so overall we find this company to be undervalued based off of the high intrinsic value and the high book value but this company may not offer as good of shareholder value as we may be thinking just because this company is still a risky asset in terms of the fact that the company does has had you know risky management decisions in the past but they have changed ceos quite often and most recently the ceo is now john stanky who i think is doing a much better job at providing value for the shareholders so i think that that will be at least good for a t as a whole and i think that also the shareholders will likely benefit from this too so overall those are our thoughts please do note that i am not a financial advisor or anything like that and this is not financial advice so please do your own research before investing anyway thank you so much for watching if you like this video please do like subscribe but this is about our channel and please comment down below and tell us what you think about this company we’ll try to get back to you anyway thank you again for watching have a great day everybody