With shares of AT&T (NYSE:T) trading at around $33.93 is T a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

AT&T is the second largest consumer wireless company in the world. With wireless being one of the hottest markets in today’s world, this has led to nice returns for investors over the past three years. The 5.40% yield is also a tremendous selling point. Verizon Communications (NYSE:VZ) might be the largest consumer wireless company in the world, but the dividend is slightly lower at 4.80%. AT&T also buys back shares on a somewhat regular basis and is looking to improve broadband capability over the next year, which is a potential positive. In addition to that, AT&T will now sell Apple’s (NASDAQ:AAPL) iPad Mini with LTE at their retail stores. That might not make a substantial difference in the overall business, but it’s not likely to hurt.

E = Debt to Equity Ratio is Strong

AT&T has a debt-to-equity ratio of .63. In regards to the overall cash position versus long-term debt, the situation isn’t as reassuring. AT&T has $2.22 billion in cash and $63.75 in long-term debt. However, the operating cash flow is $36.44 billion.

T = Technicals on the Stock Chart Are Strong.

AT&T has outperformed the S&P 500 for the better part of three years, and that’s certainly saying something.

Over the past month, AT&T is down 1.96% while the S&P 500 is down .15%. Year-to-date, AT&T is up 18.32% while the S&P 500 is up 14.43%. Over the past calendar year, AT&T is up 27.52% while the S&P 500 is up 20.94%. Over the past three years, AT&T is up 49.52% while the S&P 500 is up 37.58%.

At $33.93, AT&T is trading lower than its 50-day SMA of $35.61. It’s trading lower than its 100-day SMA of $36.16. And it’s trading lower lower than its 200-day SMA of $34.38. This stock has a tendency to climb back above all averages as long as you give it enough time.   

E = Earnings and Revenue Are Steady    

Over the past five years, AT&T has shown gradual revenue growth and steady earnings…

2007

2008

2009

2010

2011

 

Revenue ($)in billions

118.93

123.44

122.51

124.28

126.72

Diluted EPS ($)

1.94

-.44

2.05

3.35

.66

 

Quarterly revenue growth and earnings haven’t shown any substantial surprises.

 

     9/2011

     12/2011

     3/2012

     6/2012

     9/2012

Revenue ($)in billions

31.48

32.50

31.82

31.58

31.46

Diluted EPS ($)

.61

-1.12

.60

.66

.63

 

T = Trends Support the Industry, But Not Necessarily the Company

As stated above, wireless is on fire right now. With AT&T offering 4G, it’s a great option for anyone. The problem is the pricing plans being offered by competitors, especially when it comes to packages offering voice, data, and video. There is definitely a possibility AT&T will begin to lose market share over the next few years.

Conclusion

With a Forward P/E of 13.31, a 5.40% yield, and the other positives listed above, AT&T is a good risk despite the potential loss of market share in the near future. AT&T is an OUTPERFORM in the medium term.

 

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