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AT&T stock price slumped drastically after free cash-flow misses

AT&T stock declined sharply today despite having its earnings beating estimates. Its decline is, indeed, the biggest decline in the S&P 500 today. AT&T’s revenue and earnings slipped in the first quarter from a year earlier, but the real news was a slowdown in subscriber growth for its postpaid phone plans. AT&T’s stock plummeted more than 10% today reporting earnings of 60 cents per share after stripping out certain one-off expenses, slightly higher than the 58 cents predicted. Revenue of $30.1 billion was slightly lower than expectations of $30.2 billion.

AT&T stock’s decline is driven by the inadequacy of its free cash-flow. Free cash-flow was $1 billion in the period as AT&T claimed on Thursday. That was well below the $3.02 billion Wall Street predicted, according to a Bloomberg survey, and about 6% of the $16 billion the company expected for the year. The Dallas-based telecommunication corporation reported a net gain of 424,000 subscribers in its postpaid subscriber base for the first quarter, its lowest tally since early in the pandemic. AT&T had added 691,000 postpaid phone subscribers in the year-earlier quarter, followed by more than 800,000 and 700,000 in the second and third quarters.

The slowdown in the activity of postpaid subscribers—people who pay for services via a monthly bill—comes after social distancing during the pandemic made the world more dependent than usual on phones and the internet, leading to high penetration. The shortfall revives concerns that AT&T is struggling with high costs of phone inventory, network construction, and lower contributions from its declining DirectTV joint venture. The corporation said it expects higher free cash-flow levels in the second half of the year and is on track to meet or exceed its annual target.

AT&T stock price

Source: Google Finance

AT&T stock tumbled 10% to $17.87 at midday, erasing its 2023 gains. The decline in AT&T's stock price makes shareholders nervous. They can only hope that the expected earnings aforementioned by the corporation’s CFO will be met. Verizon and T-Mobile, the two other giant telecommunication corporations are expected to report their earnings on April 25, and April 27, respectively. Both companies in their filings with the Securities and Exchange Commission have warned investors of a moderation in the wireless industry’s customer growth rate. If these two giants also report negative earnings due to a decline in subscribers, then it could be the whole wireless phone industry that is in trouble.


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