AT&T's shares faced a dip of up to 6% on Friday, as market speculation emerged about the company possibly divesting its 70% stake in DirecTV. The stake, co-owned with TPG since the formation of their joint venture in 2021, is valued at $16 billion. This consideration comes as DirecTV's financial health has been deteriorating, marked by a significant drop in cash distributions to AT&T and a loss in subscribers.
In the first half of 2023, cash distributions to AT&T from DirecTV fell by nearly $1.885 billion, a year-on-year decrease of 30%. DirecTV's subscriber base has also seen a considerable reduction. The company lost approximately 400,000 subscribers, bringing the total count down to roughly 12.4 million.
Despite the current turbulence, AT&T, with a market cap of $103.31 billion, remains a prominent player in the Diversified Telecommunication Services industry, according to InvestingPro Tips. This is a testament to its resilience and ability to adapt to changing market conditions.
One of the significant strengths of AT&T is its commitment to shareholders. As per InvestingPro Tips, the company has maintained dividend payments for 40 consecutive years. With a dividend yield of 7.63%, AT&T continues to reward its shareholders despite its recent challenges. This commitment to shareholder value, coupled with a strong free cash flow yield, suggests that AT&T is well-positioned to weather the current storm.
The speculation about AT&T's potential divestment from DirecTV has fueled uncertainty about the future of the satellite TV service provider. AT&T can potentially divest after the three-year commitment to the joint venture with TPG ends on July 31, 2024. If this divestment occurs, it could indicate a strategic shift for AT&T towards focusing more on its core wireless and broadband operations.
InvestingPro's real-time metrics reveal that AT&T's revenue for LTM2023.Q2 stands at $121.44 billion, with a gross profit of $71.51 billion, indicating a gross profit margin of 58.89%. Despite the negative revenue growth of -0.27%, the company has managed to maintain a positive quarterly revenue growth of 0.92%.
InvestingPro's fair value estimate for AT&T is $18.62, providing a potential upside for investors from the previous close price of $14.55. For more insights and tips, investors can visit InvestingPro which offers a wealth of additional tips and real-time metrics.
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