• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Here's the Headline Story at AT&T These Days

It's about HBO Max, what to do with DirecTV, and the sustainable dividend yield.
By STEPHEN GUILFOYLE
May 27, 2020 | 11:00 AM EDT
Stocks quotes in this article: T, NFLX, DIS, AMZN, AAPL, CMCSA, VZ, TMUS

Ma Bell. "The Telephone Company" on the streets. Just plain "Telephone" on the just reopened trading floor of the New York Stock Exchange. Oh, this is still a telecom, and still part of my overall exposure to the coming world of 5G technology, but that's not the headline story at AT&T (T) these days. Those might be good reasons to either invest, or not invest in this name, but that's just not today's roast beef. For today, for investors, this is the story of HBO Max, the story of what to do with DirecTV, and as always the story of sustainable dividend yield.

HBO Max

Warner Media, which is part of the AT&T empire launches it's premium streaming service HBO Max on Wednesday (today). The firm has built HBO Max around it's successful HBO product. The competition is stiff as the price per month is on the high side at $15, as opposed to what industry leader Netflix (NFLX) , rising star Disney (DIS) Plus, and Hulu (also controlled by Disney) charge consumers. Not to mention the competition from the rest of a field that includes among others, Amazon (AMZN) Prime, Apple (AAPL) TV Plus, and Peacock (Comcast: (CMCSA) ).

The goal is to get HBO Max to 50 million subscribers and $5 billion in annual revenue within five years. Can it be done? Existing HBO customers number 34 million. That group will be converted. The parent firm can help get the number to the 50 million subscriber threshold, a number that Disney Plus has already reached in little more than half of one year, albeit aided by an economic shutdown that HBO Max will in some way miss. The parent firm, AT&T will likely bundle products such as telecom services, internet services, and the struggling DirecTV satellite televisions service together with HBO Max in some sort of discounted pricing scheme that could bolster the streaming service while preserving those businesses in decline.

Keep in mind that AT&T can do this in house, where as key competitor Verizon (VZ) had to cut a deal with Disney, and T-Mobile (TMUS) did something similar with Netflix. Just for an idea of what's inside the service, HBO Max will run with content provided by Warner Brothers, DC Entertainment, the Cartoon Network, CNN, and TNT. The service will also have streaming rights to such hit shows as Friends, Doctor Who, and the Big Bang Theory.

What To Do

What AT&T has to do is either find a buyer, or something better to do with DirectTV, a $49 billion purchase made in 2015 at this point  which would have to be considered something of a mistake. AT&T lost nearly 900K premium video subscribers in Q1. The firm has gone through something of a flux. Earnings and revenue disappointed for the quarter reported in late April, and guidance was pulled due to the impact of the public health crisis. The firm elevated former COO John Stankey to his new role as CEO as Randall Stephenson retired. The firm has expressed confidence in not just cash flow and paying down debt, but to maintain the annual $2.08 dividend, which at a last sale of $31.89 yields 6.75%. That's a huge selling point for these shares, at least for me.

The Chart

Though I love the dividend, these shares are currently enjoying a second consecutive gap move higher and now likely (just an opinion) hit technical resistance at the $32 level where they have hit resistance before in late April. This also happens to be a 50% retracement of the 2020 selloff. My thinking is simple. Shave to position right here, close to $32. If it comes in, buy back the portion sold close to the 50 day SMA ($29.63). If the shares don't some in, hey, you're ringing the cash register.

(Disney, Amazon, Apple, and Verizon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Stephen Guilfoyle was Long AMZN, T, VZ equity.

TAGS: Dividends | Investing | Stocks | Technical Analysis | Trading | Media | Telecommunications | Consumer Products | Telecom Services

More from Investing

I Got the 'SOS', So Here's My Take on the Stock's Saga

Timothy Collins
Feb 28, 2021 6:35 PM EST

Let's try to sort out the details of the complicated story of SOS Ltd. -- and why the short reports might be ... selling you short.

Bearish Bets: 2 Nasdaq Stocks You Should Consider Shorting This Week

Bob Lang
Feb 28, 2021 10:30 AM EST

These names are displaying both quantitative and technical deterioration.

Jim Cramer: What History Tells Us About Bond-Rate Scares Like This

Jim Cramer
Feb 27, 2021 2:01 PM EST

We could have some real pain ahead for some stocks. Five different kinds.

What's Next for Bonds, TLT and Interest Rates?

Bruce Kamich
Feb 27, 2021 12:30 PM EST

Thoughts and observations on Treasuries and the direction of interest rates.

Navigating a Market Correction

James "Rev Shark" DePorre
Feb 27, 2021 10:00 AM EST

The most critical factor in long-term market success is the ability to effectively navigate market corrections.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:51 AM EST REAL MONEY

    Watch Bob Lang and Doug Kass Discuss Short-Selling!

    Bob Lang and Doug Kass with an engaging and educat...
  • 11:32 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Navigating a Market Correction
  • 11:29 AM EST GARY BERMAN

    Where Does the Nasdaq Go From Here?

    Where does the Nasdaq Composite (CCMP) index go fr...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login