Insights

• AT&T's revenue is growing, but its profitability is under pressure due to increasing costs and expenses.
• The company's liquidity position is weak, raising concerns about its ability to meet short-term obligations.
• The company relies heavily on debt financing, increasing its vulnerability to financial distress.
• The company's strategic initiatives to expand 5G and fiber networks could drive future growth, but will require significant capital investment.
• AT&T's return on average total capital is significantly above the industry average, suggesting efficient use of capital.

Analysis

• Revenue - Revenue has been trending upward, indicating growth in the company's top line. - The company's revenue growth may be sustainable, as indicated by the positive trend and the alignment of the most recent year-over-year growth rate with the 5-year CAGR. - The company's Enterprise Value To EBITDA and Enterprise Value To Sales are lower than the industry average.
  • Profitability
    • Profitability is under pressure due to increasing costs and expenses, as indicated by the decreasing trends in gross profit margin, EBITDA margin, and net profit margin.
    • The company's gross profit margin is below both its historical average and the industry average, indicating potential issues with cost control or pricing strategies.
    • The company's EBITDA margin is greater than the industry average.
  • Liquidity
    • The company's liquidity position is weak, as indicated by the decreasing cash balance and the low current and quick ratios.
    • The current and quick ratios are significantly lower than the industry average, raising concerns about the company's ability to meet its short-term obligations.
    • The company's working capital is negative, indicating potential difficulties in managing its current assets and liabilities.
  • Solvency
    • The company relies heavily on debt financing, as indicated by the high debt-to-equity ratio.
    • The company's debt-to-equity ratio is below the industry average.
    • The company's Debt / EBITDA is below the industry average, suggesting that its debt is manageable relative to its earnings.
  • Operational Efficiency
    • The company's asset utilization is below the industry average, as indicated by the low return on average assets.
    • The company's return on average total capital is significantly above the industry average, suggesting efficient use of capital.
    • The company's return on average invested capital is slightly above the industry average.
  • Cash Flow Analysis - The company's net operating cash flow has been increasing, indicating improved cash generation from its core business operations. - The company's total capital expenditure has also been increasing, reflecting its investments in network infrastructure and technology. - The company's free cash flow margin is lower than the industry average, indicating potential challenges in generating cash from sales.
  • Risk Factors
    • The company's weak liquidity position and high debt-to-equity ratio are potential risk factors, indicating vulnerability to financial distress.
    • The presence of unusual expenses and the volatility in net income make it challenging to assess the company's sustainable earnings.
    • Increasing competition from alternative technologies and government-subsidized networks could erode market share and profitability.
  • Future Outlook
    • The company's future performance will depend on its ability to sustain revenue growth, manage its cost structure, and improve profitability.
    • The company's strategic initiatives to expand 5G and fiber networks could drive future growth, but will require significant capital investment.
    • The company's ability to generate cash flow and reduce debt will be critical for improving its financial flexibility and strategic options.

Benchmarks (as of 2025-03-28)

• Performance Comparison:

  • AT&T, Inc. (T) has shown mixed performance compared to The Communication Services Select Sector SPDR Fund (XLC). Over the past year, T has significantly outperformed XLC, with returns of 70.37% versus 17.66%. However, over a 2-year period, T underperformed XLC, with returns of 67.05% versus 71.8%. Over a 3-year period, T outperformed XLC, with returns of 86.15% compared to 40.74%. More recently, YTD, 1 Week, 1 Month, 3 Month and 6 Month returns show significant outperformance by T. This suggests that while T has had periods of strong performance, it has not consistently outperformed XLC over longer time horizons.

• Risk and Return Analysis:

  • The annualized returns show that AT&T, Inc. (T) has a higher 1-year annualized return (70.37%) compared to The Communication Services Select Sector SPDR Fund (XLC) (17.66%). However, over 2 years, T's annualized return is slightly lower (29.25%) than XLC's (31.07%). Over 3 years, T's annualized return is higher (23.01%) than XLC's (12.07%).
  • The annualized volatility data indicates that AT&T, Inc. (T) generally has moderate to high volatility, while The Communication Services Select Sector SPDR Fund (XLC) has high volatility in earlier periods that decreases to low levels in recent periods. This suggests that T's stock price may experience more significant fluctuations compared to the benchmark in the short term.
  • The maximum drawdown for AT&T, Inc. (T) was -36.46% on 07/18/2023, while The Communication Services Select Sector SPDR Fund (XLC) had a maximum drawdown of -46.65% on 11/03/2022. This indicates that XLC experienced a more significant peak-to-trough decline than T during the analyzed period, suggesting a higher risk profile for XLC.

• Risk-Adjusted Performance:

  • The Sharpe Ratio analysis reveals that The Communication Services Select Sector SPDR Fund (XLC) generally offers better risk-adjusted returns compared to AT&T, Inc. (T), especially in recent periods. While T's Sharpe ratios have improved over time, XLC consistently shows higher Sharpe ratios from Q4 2023 onward.
  • The Beta value of AT&T, Inc. (T) is consistently below 1, indicating that it is less sensitive to market movements compared to The Communication Services Select Sector SPDR Fund (XLC), which has a beta around or above 1 until late 2024. This suggests that T may offer more stability during market fluctuations.

• Overall Assessment:

  • Based on the analysis, AT&T, Inc. (T) has demonstrated strong recent performance but has not consistently outperformed The Communication Services Select Sector SPDR Fund (XLC) over longer time horizons. While T offers lower volatility and reduced sensitivity to market movements, XLC provides better risk-adjusted returns, particularly in recent periods.
  • A significant trend is the improving risk-adjusted performance of both T and XLC over time, as indicated by their increasing Sharpe ratios. However, XLC's consistent outperformance in risk-adjusted returns from Q4 2023 suggests it may be a more favorable investment option for risk-averse investors.

Peers Price History(as of 2025-03-28)

• Performance Comparison:

  • AT&T (T) has generally outperformed Verizon (VZ) across most time periods, including Year-To-Date (YTD), 1 Week, 3 Months, 6 Months, 1 Year, and 2 Years. For example, the 1-year return for AT&T is 70.37% compared to 13.44% for Verizon. Deutsche Telekom (DTE) shows mixed performance, underperforming AT&T over 6 months (24.49% vs. 31.38%) but outperforming over 3 years (112.61% vs. 86.15%).
  • AT&T's performance has been relatively consistent, showing strong returns over the past year and two years. However, Deutsche Telekom's higher 3-year return indicates superior long-term growth compared to AT&T.

• Risk and Return Analysis:

  • AT&T's annualized returns are higher than Verizon's for all periods (1 Year, 2 Years, and 3 Years). For instance, the 1-year annualized return for AT&T is 70.37% compared to 13.44% for Verizon. Deutsche Telekom's annualized return is higher than AT&T's over 3 years (28.59% vs. 23.01%).
  • AT&T's annualized volatility has fluctuated over time but generally remains moderate. In Q1 2022, AT&T's volatility ranged from 16.74% to 18.21%, while in Q1 2025, it ranged from 15.59% to 28.03%. Verizon's volatility shows a similar pattern. Deutsche Telekom initially had higher volatility but decreased to levels similar to AT&T and Verizon by late 2024.
  • The maximum drawdown for AT&T was -36.46% on 07/18/2023, while Verizon experienced a larger drawdown of -40.31% on 10/13/2023. Deutsche Telekom had a smaller maximum drawdown of -20.34% on 09/30/2022. This indicates that Verizon carries a higher risk profile due to its larger potential peak-to-trough decline.

• Risk-Adjusted Performance:

  • Deutsche Telekom generally exhibits higher Sharpe ratios compared to AT&T and Verizon, indicating better risk-adjusted returns. Verizon consistently shows negative Sharpe ratios for extended periods, suggesting underperformance relative to the risk-free rate.
  • The beta values for AT&T, Verizon, and Deutsche Telekom are consistently below 1, indicating that these stocks are less volatile than the market. Verizon has the lowest beta, suggesting it is the least sensitive to market movements, while Deutsche Telekom has the highest beta among the three.

• Overall Assessment:

  • AT&T has demonstrated strong recent performance, outperforming Verizon across most periods. However, Deutsche Telekom's higher 3-year return and generally better Sharpe ratios suggest superior long-term risk-adjusted performance.
  • Verizon's larger maximum drawdown and negative Sharpe ratios indicate a higher risk profile and underperformance compared to AT&T and Deutsche Telekom.
  • Investors seeking higher returns with moderate risk may find AT&T appealing, while those prioritizing lower risk and stable returns might prefer Deutsche Telekom. Verizon's higher risk and underperformance make it a less attractive option compared to its peers.

Peers Fundamentals(as of 2024-12-31)

1. Market Position and Size:

   • AT&T (T) has the largest market capitalization at $202,281.11 million, exceeding Verizon (VZ) at $189,141.82 million and Deutsche Telekom (DTE) at $167,251.70 million.
   • While T has the highest market cap, its revenue ($122,336 million) is less than Verizon's ($134,788 million). Deutsche Telekom's revenue is $115,768 million. T's Net Income ($10,948 million) is also less than Verizon's ($17,506 million) and similar to Deutsche Telekom's ($11,209 million).
   • AT&T holds a leading position in the wireless telecommunications industry, reflected in its substantial market capitalization. However, its financial metrics indicate that it may not be fully leveraging its size into proportionally higher earnings compared to Verizon.

2. Profitability and Efficiency:

   • AT&T's Gross Profit Margin is 42.94%, which is less than Verizon's 46.59% and the industry average of 52.95%, but significantly greater than Deutsche Telekom's 24.18%.
   • AT&T's EBITDA Margin is 36.65%, slightly greater than Verizon's 36.06%, but less than Deutsche Telekom's 42.4%. All three companies far exceed the industry average of -63.76%.
   • AT&T's Net Profit Margin is 8.95%, less than Verizon's 12.99% and Deutsche Telekom's 9.68%. All three companies exceed the industry average of -24.61%.
   • AT&T demonstrates lower efficiency in generating returns compared to its peers, as indicated by its lower Return on Average Assets of 2.73% compared to Verizon's 4.58% and Deutsche Telekom's 3.49%. Its Return on Average Total Equity is 10.54%, less than Verizon's 18.27% and Deutsche Telekom's 18.65%.

3. Financial Health and Stability:

   • AT&T's Current Ratio is 0.55, which is less than Verizon's 0.58 and Deutsche Telekom's 1.06, and significantly less than the industry average of 1.77.
   • AT&T's Quick Ratio is 0.5, which is less than Verizon's 0.55 and Deutsche Telekom's 0.99, and significantly less than the industry average of 1.64.
   • AT&T's Total Debt to Total Equity Ratio is 138.4, which is less than Verizon's 169.65 and Deutsche Telekom's 231.38, and also less than the industry average of 223.6.
   • AT&T's Debt / EBITDA is 2.75, which is less than Verizon's 2.96 and Deutsche Telekom's 2.98, and also less than the industry average of 4.9.
   • AT&T's liquidity ratios (Current and Quick) are below both its peers and the industry average, indicating potential short-term financial challenges. However, its debt ratios are lower than its peers and the industry average, suggesting a more conservative approach to leverage.

4. Valuation and Market Perception:

   • AT&T's Enterprise Value To Sales is 2.63, which is greater than Verizon's 2.48, but less than Deutsche Telekom's 2.73, and significantly less than the industry average of 18.08.
   • AT&T's Enterprise Value To EBITDA is 6.7, which is greater than Verizon's 6.38 and Deutsche Telekom's 6.43, but significantly less than the industry average of 15.91.
   • AT&T's Price To Earnings is 18.89, which is greater than Verizon's 10.84 and Deutsche Telekom's 15.04, but less than the industry average of 39.61.
   • AT&T's valuation metrics suggest that it is relatively undervalued compared to the industry average, as indicated by its lower EV/Sales, EV/EBITDA, and P/S ratios. However, its P/E ratio is higher than both Verizon and Deutsche Telekom, suggesting that investors may have different expectations for its future earnings potential.

5. Cash Flow and Capital Management:

   • AT&T's Net Operating Cash Flow is $38,771 million, which is greater than Verizon's $36,912 million, but less than Deutsche Telekom's $39,874 million.
   • AT&T's Total Capital Expenditure is $20,263 million, which is greater than Verizon's $17,990 million and Deutsche Telekom's $19,171 million.
   • AT&T's Free Cash Flow is $18,508 million, which is less than Verizon's $18,922 million and Deutsche Telekom's $20,703 million.
   • AT&T's cash flow generation is robust, with a substantial net operating cash flow. However, its higher capital expenditure results in a lower free cash flow compared to its peers, suggesting that it is investing heavily in its infrastructure or operations.

6. Growth and Future Prospects:

   • T consistently shows lower growth in Sales/Revenue, EBITDA, Net Income, and Basic Earnings per Share compared to the peer group average across all historical periods.
   • T shows higher growth in Free Cash Flow and Free Cash Flow Margin in Year -2 to -1 and Year -5 to -4.
   • The negative growth rates and high volatility in net income and earnings per share raise concerns about T's long-term profitability.
   • T's most recent year-over-year growth rates are generally lower than its 5-year CAGRs, indicating a deceleration in growth across most metrics.

7. Potential for Investment:

   • From an investment perspective, AT&T presents both opportunities and risks. Its high market capitalization and strong cash flow generation make it an attractive option for investors seeking stability and income.
   • However, its lower profitability, return on equity, and liquidity ratios, coupled with inconsistent growth trends, suggest that it may not offer the same level of growth potential as its peers.

8. Key Risks and Considerations:

   • AT&T's lower profitability metrics and return on equity compared to its peers raise concerns about its ability to generate profits from its operations and shareholder investments.
   • AT&T's lower liquidity ratios indicate potential short-term financial challenges and may limit its ability to respond to unexpected events or opportunities.
   • AT&T's inconsistent growth trends and deceleration in growth across most metrics suggest that it may be facing challenges in expanding its market share or maintaining its competitive edge.

9. Overall Assessment:

   • AT&T's financial health presents a mixed picture. It boasts the highest market capitalization and manages its debt well, as indicated by its strong Cash Flow / Total Debt and relatively low Debt / EBITDA ratios.
   • However, its profitability metrics and return on equity lag behind its peers, and its liquidity ratios raise concerns about its short-term financial stability.
   • Overall, AT&T appears to be a financially stable company with a strong market presence, but it needs to improve its profitability and liquidity to enhance its financial health.