AT&T’s Success in 5G Infrastructure and Lowering Debt Makes it a Promising Investment Opportunity
Telecommunications provider AT&T is making significant strides in the realm of 5G mobility and fiber infrastructure, bolstering its position in the industry while also reducing its net debt and increasing free cash flow. Despite a somewhat pessimistic investor sentiment over the past few years, there are several compelling reasons to believe that it’s high time to give AT&T stock a second chance.
In the third quarter that ended on September 30th, AT&T reported a notable 1% rise in revenue, primarily propelled by substantial growth in adjusted EBITDA, thanks to increases in wireless services and higher average revenue per user. Moreover, churn rates in AT&T’s postpaid phone division have shown significant improvement, serving as an indicator of reduced customer turnover.
One of the key factors contributing to AT&T’s success is the widening product margins resulting from higher average revenue per user. This has led to increased free cash flow, enabling the company to tackle its debt more effectively. In fact, AT&T’s debt ratio has gradually improved over the past year, and management has even raised its free-cash-flow forecast for the year, providing further evidence of a strong momentum.
From an investment standpoint, AT&T stock is currently trading at a relatively low forward price-to-earnings multiple and price-to-free cash flow, making it an enticing choice for investors looking for long-term prospects. Moreover, those who already hold AT&T shares could take advantage of the current depressed price to lower their cost basis, employing a contrarian investment strategy.
However, investors should remain vigilant and keep a careful watch on AT&T’s free cash flow and debt levels in future quarters to ensure that the long-term thesis for investing in the company remains intact. While AT&T has demonstrated positive advancements in various areas, it is crucial to monitor these key financial indicators to make informed investment decisions.
Overall, AT&T’s success in the 5G mobility and fiber infrastructure sectors, coupled with its efforts to reduce debt and increase free cash flow, presents a promising investment opportunity. Investors should consider giving AT&T stock a second look, especially considering the currently favorable valuation and potential for long-term growth.