T-Mobile and AT&T are Wall Street brights, but Verizon is struggling

mobtkr23 May 2022Last Update : 1 month ago
T-Mobile and AT&T are Wall Street brights, but Verizon is struggling
So far in 2022, the shares of T-Mobile (TMUS) are up 10% and AT&T (J) the stock gained about 12%. Verizon (VZ) is still in the red, but is down “only” 4% – easily beating the broader market, as the S&P 500 fell 17% to edge closer to bear market territory.

This is largely because cell phone bills have remained stable even in this inflationary environment.

AT&T and Verizon reported slight declines in average revenue per user (ARPU), a key price metric in the wireless industry, during the first quarter. T-Mobile’s ARPU rose in the first quarter after falling in the fourth quarter.

But the three companies, despite stiff competition among themselves and new threats from cable companies offering wireless services, are still showing steady, if not spectacular, growth in sales.

Analysts expect the three companies to grow by about 1-2% in revenue in 2022. (Note that AT&T’s numbers are only for its communications business following the spinoff from WarnerMedia, the owner of CNN.)

Can Wireless’ Big Three Continue to Outperform the Rest of Wall Street? Analysts seem to think it is possible.

T-Mobile has been bolstered by its acquisition of Sprint and analysts are bullish on the stock thanks to strong subscriber gains and an aggressive rollout of its high-speed 5G network.

Meanwhile, AT&T has profited from becoming a pure-play telecommunications company again. The company spun off from WarnerMedia earlier this year and that unit merged with media company Discovery Communications to create Warner Bros. Discovery.
As for Verizon, it may be down to a comeback: It was the Dow’s second-worst stock last year, behind only disney (SAY).

Verizon could also benefit from the tendency of conservative investors to flock to big dividend payers during this tough market because of the steady streams of income they provide. Verizon’s yield is 5.2%, compared to around 2.8% for the 10-year Treasury.

AT&T is also benefiting from this trend, since it pays a dividend which yields 5.4%. T-Mobile does not pay a dividend.

AT&T and T-Mobile always make better bets than Verizon

Still, there may be good reasons why Verizon could continue to lag Ma Bell and T-Mobile.

Verizon is “the oldest statesman in the wireless industry,” MoffettNathanson analyst Craig Moffett said after Verizon’s latest earnings report last month. Moffett noted that Verizon’s growth potential is less exciting than that of AT&T and T-Mobile.

He pointed out that “AT&T has taken on the role of a brash discounter,” offering generous customer subsidies for new phones because “they seem clearly committed to commitments to show subscriber growth at all costs.”

Other market strategists are also bullish on AT&T. Ivan Feinseth, chief investment officer and head of research at Tigress Financial Partners, said in a report this month that AT&T should be able to “deploy the money received from its WarnerMedia sale to reduce its level of debt. “.

Inflation is everywhere.  Except your mobile bill

Feinseth also believes AT&T will soon return to growth in its core business.

“While 2022 will remain a year of transition, revenues and, more importantly, cash flow and profitability will grow significantly in 2023 and beyond, with long-term growth driven by continued 5G opportunities. and broadband,” he said. “AT&T is well positioned to benefit from strong subscriber growth in its core businesses, including wireless.

Moffett is also confident that T-Mobile can continue to thrive.

“T-Mobile is still the newcomer to the industry, and their investors are demanding subscriber growth. With a still long runway in rural and commercial areas, and the lowest prices in the industry, they are well positioned to deliver,” he wrote.

At Warren Buffett’s Berkshire Hathaway (BRKB) also owns a stake in T-Mobile. But the firm of the Oracle of Omaha recently sold almost all of its stake in Verizon.


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