AT&T: Multiple Disappointments In Q4 Results Confirmed Structural Challenges

(Preview) Company Update (T US) (Neutral)

Summary

• AT&T stock closed down 8.4% after Q4 2021 results. We believe investors were unnerved by evidence of structural challenges.

• The key Mobility segment saw postpaid net adds decelerated in Q4 even as competitors accelerated, and EBITDA fell sequentially.

• WarnerMedia saw EBITDA down 20% from Q3 and 38% year-on-year. Content costs are rising and are guided to peak in 2022.

• Consumer Wireline broadband net adds turned negative, Business Wireline EBITDA declined again. 2022 EPS and Free Cash Flow are to be lower.

• Ultimately, despite superficially attractive valuation including a 7-8x P/E, we believe the structural challenges at AT&T are too great. Avoid.

Introduction: Why Is AT&T Stock Down?

AT&T Inc. released Q4 2021 results Wednesday morning (January 26).

AT&T stock closed down 8.4% for the day, while Discovery, which has agreed to merge with AT&T's WarnerMedia business, closed down 9.2%.

We initiated our Neutral rating on AT&T in July 2021. Since then shares have lost 13.5% (after dividends…