AT&T Q1 preview: Where next for T stock?

When will AT&T release Q1 2022 earnings?

AT&T is scheduled to release first quarter earnings before US markets open on Thursday April 21.

AT&T Q1 2022 earnings preview

Wall Street forecasts AT&T will report a 15.6% decline in revenue to $37.1 billion from the $43.9 billion booked the year before, while adjusted EPS is expected to decline 12.7% to $0.75 from $0.86.

The fall in revenue and earnings will be mainly driven by the fact AT&T has divested several businesses during the past year, including the sale of DirecTV and Vrio as it continues to simplify the business. Its Latin America unit is expected to report its lowest revenue in years of just $752.3 million, down over 45% from what was reported 12 months earlier, as a result of the sale of Vrio in November.

It also reflects continued falls in revenue from offering wired services to businesses as its legacy operations continue to fall away, with the Business Wireline unit expected to see revenue fall 3.6% from the year before to $5.8 billion. Analysts anticipate revenue from Consumer Wireline will rise 1.9% to $3.2 billion, as demand for fibre broadband continues to grow and offset continued declines in legacy services around phones and data.

Meanwhile, its core Mobility division is forecast to report 3.6% year-on-year growth in revenue in the quarter to $19.7 billion and report total net additions of 3.2 million, marking the slowest rate of growth in 18 months as it comes up against tougher comparatives this year. The number of wireless postpaid net adds will come further under the spotlight as AT&T refocuses on becoming a telecoms company. Analysts believe it will report 547,190 postpaid net adds in the quarter, down from 823,000 the year before and the 1.3 million net adds secured during the previous quarter.

Notably, AT&T recently spun-off WarnerMedia and combined it with Discovery to create a new listed player in the streaming industry named Warner Bros Discovery, with AT&T securing $40 billion in cash and shareholders taking stakes in the new venture. That was completed on April 11, meaning this won’t impact AT&T’s results in the first quarter but come into play in the second. WarnerMedia will contribute growth to AT&T in the first quarter with consensus figures pointing toward a 6.8% year-on-year rise in revenue to $9.1 billion.

AT&T CEO John Stankey said the WarnerMedia spin-off ‘marks the beginning of a new era’ for the business. The funds raised will allow it to invest ‘record levels’ into its 5G and fibre broadband networks. Importantly, he has also vowed to sharpen the company’s focus on shareholder returns and said the company will ‘invest for growth, strengthen our balance sheet and reduce our debt, all while continuing to pay an attractive dividend that puts us among the top dividend paying stocks in America.’ Investors will be paying attention to the company’s plans as it refocuses on becoming a telecoms business.

Where next for T stock?

AT&T shares suffered their biggest fall in a single day when it released its last set of quarterly results in late January and had remained under pressure until last week, when the stock gapped higher to not only recapture the 50-day and 100-day moving averages but also the 200-day sma for the first time in almost 10 months.

Notably, the surge last week was short-lived considering the stock has fallen back since breaching the $20 mark. This pushed the RSI into overbought territory for the first time in almost three months, suggesting it could hold as a firm ceiling going forward. It can look to target the 2022-high of $20.74 should it make a sustained move above here. Average-volume-at-time over the last five trading sessions has been over 53% higher than the 100-day average, suggesting the recent reversal can gain pace. Notably, the 31 brokers that cover the stock currently believe AT&T can soar over 37% from its current level over the next 12 months with an average target price of $26.71 – a level not seen since the start of the pandemic.

On the flip side, the stock has closed above the 200-day sma, which currently sits at $19.35, for the past five trading sessions and this should be treated as the initial floor. A move back below here could see shares swiftly unravel back toward the shorter-term moving averages closer to $18 to close the gap created last week.

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