AT&T stock rises after completion of WarnerMedia spin-off
concluded its WarnerMedia spin-off late last week, and the title was rising on Monday.
The stock jumped 8% to $19.67.
AT&T (ticker: T) decided in February to structure the WarnerMedia divestiture as a spinoff instead of a spin-off or trade. A split would have given AT&T holders the ability to swap their holdings for shares of the new Warner Bros. Discovery listed on the stock exchange. The current spinoff gives shareholders a portion of the combined company for every AT&T share they held at closing.
The telecom giant had announced the $43 billion transaction with
Discovery (DISCA) about a year ago. The sale was part of AT&T’s strategy to create a more focused communications business consisting solely of its mobility, consumer wireline telephony, and business wireline telephony sub-segments.
“With the closing of this transaction, we expect to invest at record levels in our growth areas of 5G and fiber, where we have strong momentum, while working to become America’s top broadband company.” , said John Stankey, CEO of AT&T. “At the same time, we will place greater emphasis on shareholder returns.”
At closing, AT&T received $40.4 billion in cash and WarnerMedia’s retention of certain debt, according to a press release. AT&T shareholders received just over 0.24 shares of the new Warner Bros. Discovery for every AT&T stock they held.
“We plan to invest for growth, strengthen our balance sheet and reduce our debt, while continuing to pay an attractive dividend that puts us among the highest dividend-paying stocks in America,” Stankey said.
in a note released today, BofA Securities analyst David W. Barden estimated the new dividend yield should be around 4.4% if the stock hits the $25 price target of the society. “With the deal closed, dividends reset and the investor base stabilizing, we believe the stage is set for investors to begin focusing on improving AT&T’s fundamentals,” writes Barden.
On the news, JP Morgan analyst Philip Cusick upgraded to an overweight rating for the company’s stock, when it didn’t have a rating earlier. Cusick said that as long as the company can continue to meet its guidance and financial target, the stock remains defensive and inexpensive with a high dividend yield.
AT&T is expected to release its first quarter results on April 21 before the market opens. Analysts tracked by FactSet are forecasting adjusted earnings per share of 75 cents on revenue of $38.26 billion for the quarter ending March.
But analyst Gregory Williams of
does not view earnings as a catalyst and rates the stock at Market Perform. He expects AT&T’s quarterly results to be in line with expectations and asks investors to wait for evidence of execution.
“We expect more of a ‘wait and see’ sentiment as we move beyond the… closing of the WarnerMedia transaction and investors feel more comfortable [with AT&T] execute on its newly unveiled goals in challenging markets across the board,” he said, noting the competition in the 5G space.
On average, the stock is rated Hold on FactSet with a price target of $26.70. Cusick has a December 2022 price target of $22.
Write to Karishma Vanjani at [email protected]