This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

AT&T, With DirecTV, Has the Firepower for a Major Stock Move

Stocks in this article: T DTV S TMUS VZ

NEW YORK (TheStreet) – No one is going to deny that AT&T (T) is a mature company. Growth has slowed over the past couple of years, but the Dow component is one the market's top dividend payers with a yield of 5.20%.

The company's management isn't satisfied with the status quo. It wants to show Wall Street that maturity is not an enemy of growth.

AT&T's $48.5 billion deal for satellite TV provider DirecTV (DTV) was its first real sign of how serious management has become. Observers are taking a wait-and-see attitude. The company reports second-quarter earnings Wednesday.

Chipotle Just Said 3 Amazing Things on its Earnings Call

Netflix Just Exceeded A Big Milestone: 50 Million Members Worldwide

Bill Ackman Says He’s Spent $50 Million on Herbalife Battle

The stock closed Monday at $35.96. Shares are up 2.3% on the year to date. But over the trailing 12 months, AT&T stock has gained only a fraction, trailing the telecom sector's 12% gain. During that same span, both smaller rivals Sprint (S) and T-Mobile (TMUS) have gained 27% and 29%, respectively.

I would be a buyer here ahead of Wednesday's report. Investors are discounting AT&T in several critical areas -- both on its on merits and on the potential accretive value from DirecTV.

First, on its own, the stock is trading at just 10 times trailing earnings, even though shares are a mere 2.5% away from their 52-week high. When we factor the valuation on fiscal 2015 estimates of $2.75, AT&T shares still trades at a P/E of 13, which is three points below the industry average and one point below Verizon (VZ).

From my vantage point, AT&T is trading on the assumption that it will yield little to no growth. But there are more reasons to own this stock than for its dividend.

With DirecTV coming onboard, I think AT&T can reach $42 sometime in 2015. I say this knowing full-well that the deal still needs to pass regulatory approval. I don't think the market fully appreciates how much scale AT&T can drive across all of its businesses through DirecTV.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs