Red alert: AT&T stock price is at risk before earnings

AT&T stock price pulled back to $27, down from the year-to-date high of $28.87. It has plunged to the lowest point since May 15 this year. This article examines why technical indicators suggest further downside after the company’s earnings this week.

AT&T stock price analysis 

The daily chart shows that the AT&T share price has pulled back in the past few weeks. It has moved below the 50-day Exponential Moving Average (EMA), indicating that bears are currently in control. 

The stock formed a rising wedge pattern, a popular bearish reversal pattern in technical analysis. This pattern comprises of two ascending and converging trendlines, with a bearish breakout happening when the two lines converge. 

The AT&T stock price has formed a bearish divergence pattern as the Relative Strength Index (RSI) has moved below the neutral point at 50. Also, the MACD indicator has also dropped below the zero line. 

Therefore, the stock will likely continue falling as sellers target the key support at $24.42, its lowest point on March 12. This target is about 9.20% below the current level. A move above the key resistance at $28 will invalidate the bearish AT&T stock forecast.

AT&T earnings ahead

The main catalyst for the AT&T share price will be its earnings this week. Analysts anticipate that the company’s earnings will be relatively strong as it is unlikely to be impacted by the recent earnings.

The company’s earnings are expected to show that its revenues rose by 2.23% to $30.45 billion. Its forward revenue estimate for the third quarter will be $30.8 billion.

AT&T’s annual revenue is expected to come in at $124.28 billion, followed by $125.8 billion. Analysts also anticipate that its earnings per share (EPS) will be $0.53, down from $0.57 last year.

Read more: Here’s why T-Mobile stock price keeps beating AT&T and Verizon

The most recent results showed that the company’s postpaid phone subscribers added 324k to over 73 million. Its free cash flow (FCF) rose to $3.1 billion, up from $2.8 billion.

Analysts are optimistic that the AT&T stock price, which they believe is highly undervalued. The average analyst estimate is that the average stock forecast was $29.37, up from the current $26.9.

Some of the most bullish analysts are from companies like Morgan Stanley, Scotiabank, Wells Fargo, UBS, and Tigress Financial, who have a buy or overweight rating. 

One of the main bullish thesis is that the company is cheap. It has a forward price-to-earnings (PE) ratio of 12, much lower than the sector median of 18.20. 

The forward EV-to-EBITDA ratio of 14 is also lower than the sector median of 16. Analysts also point to its dividends, which has a forward yield of 4.12% and a payout ratio of 50%, which is better than most companies. 

Read more: AT&T stock price is soaring: is it a good dividend company?

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