NEW YORK (TheStreet) -- AT&T (T) - Get Report shares are retreating by 0.72% to $34.49 on Thursday morning, as the U.S. carrier will stop offering customers two-year contracts to subsidize new smartphone purchases.
Beginning on on January 8, buyers will have to pay the full price for mobile devices upfront or in installments over a period of time under its "AT&T Next" plan, Engadget.com reports.
"With $0 down for well-qualified customers, the ability to upgrade early and down-payment options available with even lower monthly installments, our customers are overwhelmingly choosing AT&T Next," AT&T stated according to Re/code.
AT&T was the last of the U.S. carriers to offer two-year contracts. Sprint Corp. (S) and Verizon Communications (VZ) announced back in August that they would no longer offer contracts and T-Mobile US (TMUS) also ditched this offering over two years ago.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate AT&T INC as a Buy with a ratings score of B-. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- T's revenue growth has slightly outpaced the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 18.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $10,797.00 million or 23.76% when compared to the same quarter last year. In addition, AT&T INC has also modestly surpassed the industry average cash flow growth rate of 16.27%.
- The gross profit margin for AT&T INC is rather high; currently it is at 55.43%. Regardless of T's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.65% trails the industry average.
- AT&T INC's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.23 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.71 versus $1.23).
- After a year of stock price fluctuations, the net result is that T's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: T