AT&T Inc. (T): Did This Company Suggest Their Stock Is Too Expensive?

There is just one problem
If AT&T were the second best wireless carrier, and had the best wireline performance, I could accept buying the stock. The problem is, the company basically said the shares are too expensive. The comment that nearly jumped off the page was, “The company expects to make future repurchase opportunistically, which will slow the pace of buybacks compared to recent activity.” In short, our stock used to be cheaper and was a good value so we bought a lot. However, the stock is up from its bottom and doesn’t represent as good of a value, so we are going to wait for a lower price.

Though companies don’t always have a great record with share buybacks, AT&T has almost 7% less outstanding shares today versus last year. If the company says it will “slow the pace” of buybacks, this means at the very least, the stock isn’t as attractive as it once was. Tied to this statement, investors need to realize that AT&T’s core operating cash flow (net income + depreciation) was up just 1.1% year-over-year. Compared to an increase of 0.5% at CenturyLink this looks okay, but Sprint reported a 5.73% increase, and Verizon grew operating cash flow by over 13%.

Investors in AT&T fall into two classes at this point. If you are a long-term holder of the stock, I would reinvest your dividends and hold on. I would not be too aggressive in adding to your position. If you are an investor considering buying AT&T, I would wait as the company apparently is for a better price. The stock has a nice yield at about 4.87%, but if the shares decline the yield will only go up. Consider adding T to your Watchlist on Fool.com to keep track of what’s going on.

The article Did This Company Suggest Their Stock Is Too Expensive? originally appeared on Fool.com and is written by Chad Henage.

Chad 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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