AT&T Inc. (T): Was It Unfairly Punished by the Market?

And then came Google Inc (NASDAQ:GOOG)…

The telecom industry is pretty duopolistic in nature, with Verizon and AT&T dominating most of their smaller competitors by light years. There is a lurking threat– possible a very serious one– coming to light, however. It may be even more threatening than hidden underfunded pension problems that suddenly pop-up. This threat comes from Google Inc (NASDAQ:GOOG).

With Google Fiber, the search-giant is bringing lighting-fast Internet services to select cities. While nothing more than a minor threat to traditional telecom companies now, this threat could be very troubling long term. Google Inc (NASDAQ:GOOG) Fiber is already approved for Kansas City, MO. and Austin, Texas. The next city that Google is eyeing is Provo, Utah, and Provo’s city council recently approved the deal.

Google has a history of being disruptive, and its new fiber-optic ambitions could be a game changer in the future. The company is good at doing things cheaper, and people like cheap.

There’s money in it for Google as well of course, because more people on the Internet most likely means more people using Google’s services and products. It is probably too early to tell how disruptive Google Fiber will or won’t be, but it is something to keep in the back of an investor’s mind if considering putting money into AT&T Inc. (NYSE:T) and/or Verizon Communications Inc. (NYSE:VZ).

The bottom line

While AT&Ts last quarter was disappointing, it was by no means dooming. The sell-off was likely driven by temporary and short-terms problems. Analyst downgrades and profit takers most likely also contributed to the haircut in share price.

Over the long term, however, AT&T looks attractively valued as long as the company meets expectations, which is why I decided to start a small position in the company to “test the waters”. I will also be monitoring the stock much more closely than many of my core holdings as well, to make sure the fundamental story stays intact– especially before adding any more to my position.

AT&T Inc. (NYSE:T) is cheaper than Verizon going forward and offers more yield. Opening up a quarter or half position now and layering in on further dips should pay off, as long as the company can continue to increase earnings and improve wireless margins while adding new subscribers. If searching for a high-yielding blue-chip stock for your portfolio at a good price, now is a good time to consider AT&T.

The article Was AT&T Unfairly Punished by the Market? originally appeared on Fool.com and is written by Joseph Harry.

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