read upcoming divestments What do I do? AT&T target the firm. Since the experts consider that after the Discovery deal with Warner Bros.could offer a 6% return second Brian O’Connell in The Street.
“The only resounding quality of owning AT&T has been the skyrocketing dividend yield,” wrote the Real Money columnist Brad Ginesin. “Still, the stock will still manage to lose close to the equivalent of the dividend payment annually, so holding the stock seems to be for nothing.”
But things could be changing for the telecoms giant in the wake of a recent investor day because “the opportunity looks too strong at the current price before the Discovery deal closes.”
The deal with Warner Bros.
AT&T is ready to split Warner Bros to the shareholders of Discovery, which is likely to prevent mid-April. The transaction would give AT&T shareholders 0.24 of a share of the new Warner Bros Discovery (including all current Discovery shares) per AT&T share.
“The value that AT&T gets is extrapolated from the current value of Discovery, the 71% of a 62 million dollar company. So at the current price of around 26 dollars for Discovery, AT&T holders have about 6 dollars per share in the value of Warner Bros Discovery,” Ginesin said. “Subtracting that from the AT&T stock price of ~$23, the remaining $17 will encompass the new AT&T stock. As part of the separation from Warner Bros, AT&T will transfer more es 40 billion dollars in debt to the new Discovery from Warner Bros.
With AT&T and the equivalent of 17 dollars required for the operation, the shares will be between the two S&P 500 cheapestbut the company provides a essential service with a growing business that produces a strong cash flow.
“The New AT&T will be a company with a Market capitalization of 120 billion dollarswith growing revenue from a single digitalo low, earning this year around 2.30 dollars per share and 20 million dollars in expected cash flow in 2023,” Ginesin said. “The proportion of 40% dividend payout Produces more than 6%“.
AT&T’s pro forma shares have a P/E of 7 you free cash flow performance of two digital, metrics that provide stocks with limited downside and plenty of upside as Wall Street gets comfortable with AT&T, more focused, less complex and indebted. “Management sees potential for share buybacks after increased capex peaks in 2023 and net debt decreases to 110 billion dollars”, emphasizes Ginesin.
Wall Street is taking a wait-and-see stance before the deal to crack AT&T closes and Warner Bros. Discovery will trade after the deal, possibly missing out on the opportunity to own Discovery at a reasonable valuation and AT&T at a bargain price.
“On AT&T Investor Day, management presented a credible organic growth and cost reduction plan that will help support strong earnings and free cash flow assumptions,” added Ginesin. “Any Wall Street appreciation for AT&T’s steady and growing cash flow would result in a much higher stock price.”
AT&T It closed the season on Thursday at $23.33 and the location of the moving averages, the 70-period one below the 200-period one, would give us a bearish signal. Meanwhile, most Ei indicators are bearish.