Why AT&T (T) Stock Is Up Today

NEW YORK (TheStreet) -- AT&T (T) was gaining 0.4% to $36.18 Tuesday on news that the telecom and The Chernin Group will acquire, invest in, and launch a new online video business.

The Chernin Group, which manages and invests in media businesses such as anime streaming service Crunchyroll, and AT&T will commit more than $500 million in the new joint venture. The companies said the venture will invest in ad- and subscription-based video services and online streaming.

AT&T and The Chernin Group reportedly worked together for a big for Hulu last year, which was rejected. The new venture should compete with Hulu and other services such as Netflix (NFLX).

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TheStreet Ratings team rates AT&T INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AT&T INC (T) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, notable return on equity, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • T's revenue growth has slightly outpaced the industry average of 1.0%. Since the same quarter one year prior, revenues slightly increased by 1.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, AT&T INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for AT&T INC is rather high; currently it is at 63.10%. It has increased significantly from the same period last year. Along with this, the net profit margin of 20.84% is above that of the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Diversified Telecommunication Services industry average. The net income increased by 279.2% when compared to the same quarter one year prior, rising from -$3,857.00 million to $6,913.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.82, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • You can view the full analysis from the report here: T Ratings Report

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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