For a non-travel or hospitality-related business, AT&T (NYSE: T)
is certainly making hard work of its recovery from Q1’s crash. Granted, it’s not an e-commerce business
or an obvious winner from the fast-growing work-from-home economy, but still, it’s a $200 billion telecommunications company whose shares are still down 25% from pre-COVID levels and only up 13% from March’s lows.
It would be somewhat understandable if shares had been under pressure already coming into the pandemic, but they weren’t. From December 2018 to December 2019 they rallied 45% and had reversed 2 and a half years of constant decline. That being said, there had been some weakness creeping into the company’s earnings and a few eyebrows were starting to be raised on Wall Street. In hindsight, it looks as if that rally in shares was very much against the run of play, with little justification from the company’s top-line performance ever materializing.
Case in point, as recently as last October, when the S&P 500 index was printing all-time highs on a weekly basis, AT&T reported Q3 results that missed expectations and showed revenue contracting almost 3% year on year. In January, with the S&P at even higher highs, AT&T’s Q4 results disappointed investors again as they painted an almost identical picture to October, and that was before COVID hit.
Maybe it was always going to happen with consistently disappointing results like that, but the onset of the COVID pandemic and the risk-off sentiment that swept markets was the straw that broke the camel’s back and brought shares back down to reality. In less than five weeks from the end of February, shares had fallen more than 30% and as mentioned above, have since struggled to undo even half that damage. April’s Q1 report confirmed the backward momentum with another miss on analyst expectations and almost a 5% contraction in revenue.
Some bears have been saying for a while that the outlook was far from rosy. In November, MoffettNathanson cut the stock to a Sell with weakening fundamentals driving the decision. This was a brave move given shares were trading at two-year highs at the time. In April, when their $30 price target had been hit following AT&T’s fall, they reiterated the Sell rating and dropped their price target to $23 which was even lower than the lows the stock hit in March.
The ‘highly cyclical’ nature of most of AT&T’s businesses was and is a red flag for Moffet which means AT&T’s EBITDA is particularly exposed to a pandemic driven recession. The company’s 7% dividend yield is at risk of being cut while bond rating agencies could soon be circling and threatening downgrades.
One catalyst that could help spur a turnaround and drive recovery is the introduction of 5G phone networks. As demand increases for phones that can handle 5G, AT&T’s revenue should see a much-needed bump. While this is of course an oversimplification, there’s no doubt that many investors will be viewing the company’s ability to make hay off the back of the 5G rollout as a make or break event.
With so many tech and e-commerce stocks trading at all-time highs, it’s an uphill battle to convince investors with cash on the sidelines to back a $200 billion company that is far from being the most COVID-exposed business but that is still struggling to grow. For the additional bearish sentiment, just stretch out the timeline on the stock’s chart; it was trading at current prices as far back as 1996.
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6 Gambling Stocks Ready For a Rebound
If you didn’t believe that gambling stocks are a worthwhile investment, consider this. The Business Research Company projects the global gambling market to reach $565.4 billion through 2022. That assumes that the industry will continue growing at is annual rate of 5.9%.
The gambling industry is composed of many segments. There are casinos, lotteries, and the now legalized segment of sports betting. But gambling is also broken down into offline gambling, online gambling and even virtual reality gambling. In fact, virtual reality gambling is projected to grow at an annual rate of 21.5% until 2022.
But virtual reality is only one of a number of emerging technologies that are changing the “traditional” face of the gambling industry. There are now hybrid games – the combination of online and land-based games and even augmented reality games.
And don’t forget about fantasy sports. Fantasy sports has created an entire industry and it wasn’t created for one person to have bragging rights over their buddies. Fantasy sports is a multi-million industry.
But like many other segments of the economy, gambling stocks were hit hard by the Covid-19 pandemic. Not only were casinos closed, but live sports were also put on hold. This dried up many of the traditional avenues of gambling, and gambling stocks sank lower as a result.
However, the global economy is starting to re-open. And while it was thought that casinos would be one of the last to come back, there are casinos that are starting to re-open. And, it’s becoming more and more likely that there will be live sports (likely without fans initially) sooner rather than later. And that will open up the fantasy sports market.
These stocks tend to move quickly. So now is the time to take action. That’s why we’ve created this special presentation that highlights 6 gambling stocks that are ready for a rebound. The sell-off was real, but so will the comeback. And when it does, these stocks may cost much more than they do now.
View the "6 Gambling Stocks Ready For a Rebound".