AT&T Stock Charts Say Investors Might Call in Buy Orders

AT&T reported an earnings beat, in-line revenue and solid free cash flow. The charts say a buying opportunity might be shaping up.
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AT&T  (T) - Get Report is not known for its sharp volatility, but this stock could be shaping up as a quality buying opportunity.

On Thursday before the open, AT&T reported second-quarter non-GAAP earnings of 83 cents a share, which topped analysts' estimates by 4 cents. 

Revenue of $40.95 billion fell 9% from a year earlier but was in line with expectations.

The company’s earnings report comes a day ahead of Verizon’s  (VZ) - Get Report quarterly results.

A drop in WarnerMedia revenue — which fell 23% year-over-year — weighed on the company’s overall sales. 

Free cash flow came in at an impressive $7.6 billion for the quarter. While that was down from a year earlier amid the coronavirus pandemic, it left AT&T with a dividend payout ratio of just 49% of free cash flow.

In other words, the company’s 6.9% dividend yield is relatively safe. That’s even as AT&T saw a net debt reduction of $2.3 billion in the most recent quarter.

While it may not sport robust growth, AT&T has a massive dividend at a time where fixed income is hard to come by. 

As the 10-year Treasury bond yields just 0.58%, AT&T stock should be attractive to income-oriented investors.

Trading AT&T Stock

Daily chart of AT&T stock.

Daily chart of AT&T stock.

At the same time, it may not be attractive to traders. This one’s a slow mover and while it’s trying to hold some key levels, no trend is in play just yet. Perhaps the earnings report will change that.

The stock is down about 1% on Thursday and it’s struggling to hold the 20-day and 50-day moving averages.

Ideally bulls will see these marks hold as support, while AT&T rotates back over the July high at $30.50 and uptrend support (blue line).

A close over the July high could put a gap-fill up toward $31.50 in play, followed by the June high near $32.50. Above that and the 200-day moving average is possible.

On the downside, look for a close below $29.50. That could put the June low in play at $28.43.

As much as bulls want to pound the table on AT&T’s valuation, dividend and the fact that shares were near $38 in January, remember that this stock was also sub-$26 in March. 

It also has a lot of debt and is down slightly so far after earnings. 

Respect the levels and let the stock tell you where it’s trying to go.