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AT&T: Cash And Leverage Should Be The Focus (For Now)

April 27, 2020

Summary:

*AT&T's stock has disappointed so far in 2020, as it has underperformed the broader market by a wide margin.

*The company recently reported lackluster Q1 2020 results but I believe that investors should focus on 2 key metrics, free cash flow and net debt, over the next few quarters.

*I am long AT&T, and I recently added to my position.

 

AT&T's ($T) stock performance has been subpar for a significant period of time, and it has pretty much been the same story so far in 2020. On a YTD basis, T shares have underperformed the S&P 500 (SPY) by over 10 percentage points.

 

Poor investor sentiment for the communications sector (and I should note for good reason) has wreaked serious havoc on AT&T's stock price but I believe that this company is worthy of investment dollars at today's price. Yes, it will likely take time for AT&T's story to fully play out, especially given the current headwinds, but that does not mean that investors should jump ship.

The company's Q1 2020 operating results were not great by any means but, in my opinion, investors should focus on 2 key metrics (free cash flow dividend payout and net debt-to-adjusted EBITDA) until the current COVID-19 related uncertainty passes.

 

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