AT&T Inc. (T): Better Equipped to Face the Competition

Sprint acquired Clearwire a few days ago, to strengthen its position in the 4G LTE market. This deal is expected to benefit the public at large, with the customers ending up with a faster and richer 4G LTE service. With the global LTE market entering its high growth phase, this merger will help Sprint in grabbing a major share of the expanding market.

Financials

Compared to the industry, AT&T Inc. (NYSE:T) is itself overvalued based on its P/E, but Leap is undervalued to a large extent as it has negative earnings. It may be the right time to buy AT&T as Leap becomes a part of AT&T. Leap’s EPS is reverting from the negative trend that it has followed. With the acquisition taking place, AT&T Inc. (NYSE:T) will be able to post higher earnings based on its strengthened market position and expanded service network. Hence, I would recommend buying this stock.

Based on its P/E, Sprint is currently an undervalued stock compared to the industry. However, taking a look at its negative operating margins, which continue to increase, can be a cause of concern for investors. The company has been unable to control the increase in its expenses. The ability to report earnings is very important. Keeping in view the new service package introduced by Sprint, the company will be able to enjoy the first mover advantage in this area. This will assist in turning the company’s negative earnings into profits. Thus, in my opinion, this stock should be purchased.

The article AT&T: Better Equipped to Face the Competition originally appeared on Fool.com and is written by Awais Iqbal.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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