AT&T Isn't Sexy, But It's A Buy

I've been going over this stock all week in my head: AT&T (T). There's just something in me that wants to sell it badly, all of it. It's probably because I've held the stock for quite some time now and it's still at a loss! Now, just a little back story, I originally purchased the stock awhile ago based on Warren Buffett's sage advice of "buy what you know" and if "you use it, you should own it". Well, I've been an AT&T customer for years and it's one of the first company stocks I've ever purchased partially because I use it and partially because of it's outstanding dividend yield of 7.16%. As someone who values income, I've always been a dividend investor; there's also just something in me that makes me feel like I have a right to part of the company's earnings if I'm a shareholder. That being said, after careful examination, I personally rate AT&T (T) as a buy and/or hold stock at the moment and I think it's undervalued and underappreciated.

Let's start with the ugly. It's all about image, and right now AT&T is not one of the cool kids on the block. It's not talked about heavily on the news and hardly even mentioned when analysts talk about the coming 5G revolution. Personally, I don't like the executive management team; in my eyes, they represent too much of the old guard. Their CEO John T. Stankey, while new in this role, is the former CEO of WarnerMedia (then Time Warner), which was acquired by AT&T in 2015 under his guidance along with DirecTV; a move that led to a $200 billion debt for the company. He's also been with the company since it was Southwestern Bell Corporation in 1995. The previous CEO Randall L. Stephenson had been with the company since 1982 when it operated as Southwestern Bell Telephone.

Long story, short, AT&T's leadership appears to be the "good ole boy" type scenario that we often see in corporate America. If you stay with the company long enough, you can work your way up, in spite of performance. I think some fresh new blood and an image makeover could turn this stock's performance around very quickly.

And now the good part and why I still think this company is a stock you want to own going forward. Numbers still do matter and while the Fed pumped $1.5 trillion into the stock market back in March, that money went to the repo markets and had little effect on AT&T. The stock dropped $8.03 (21.6%) in March, at the height of the pandemic, and is one of the few to have rebounded. This means it's still selling at a deep discount compared to the rest of the market and especially the heavy hitters.

Skeptics point to AT&T's enormous debt, but with a $206.126 billion market cap and with $551.669 billion in assets, the company could pay off its $184.951 billion in debt without much of a problem. Financially, it's still on very solid ground and is cutting more than 3,400 jobs across technicians and clerical workers as well as 1,300 retail jobs. So, in the midst of the pandemic, the company is cutting costs while still making money. There's one thing that Americans need and that's cell phone service and the internet. And there's only a few players in the telecommunications industry.

Finally, we cannot forget the upcoming 5G revolution and the impact this will have on AT&T's sales and balance sheet in the near future. Some analysts are estimating anywhere between a $2.2 trillion and $3.6 trillion economic impact from 5G within the next 15 years, equating to as many as 22.3 million new jobs. This is the huge elephant in the room that no on is talking about, simply because the market is currently focus on the popular tech stocks that have driven the stock market rally all year long. I'm very bullish on AT&T and have confidence it's management team will make the proper adjustments in the long-run to keep this company at the top of the telecommunication industry. Buy it now, while it's cheap!

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