S&P 500 Pulls Back As Traders Stay Focused On Rising Treasury Yields

Key Insights

  • Treasury yields continue to move higher, which is bearish for stocks. 
  • Existing Home Sales declined, serving as an additional negative catalyst for S&P 500.
  • Energy and tech stocks managed to stay in the positive territory despite rising yields. 

S&P 500 Remains Under Pressure

S&P 500 faced resistance near 3730 and pulled back towards the 3650 level as traders focused on rising Treasury yields. The yield of 10-year Treasuries tested new highs near the 4.25% level, while the yield of 2-year Treasuries moved above the 4.60% level. Such levels were last seen back in 2007.

Not surprisingly, traders are nervous as they fear that high yields will put too much pressure on the economy.

Existing Home Sales report indicated that Existing Home Sales declined by 1.5% month-over-month in September. Higher interest rates will continue to put pressure on the housing market in the upcoming months.

Tesla was among the biggest losers today as traders reacted to the earnings report that was released yesterday after the market close.

AT&T gained 7% after the company’s results beat analyst estimates on both earnings and revenue. AT&T has also raised the full-year 2022 guidance, which was bullish for the stock.

Most market segments have been under pressure today, although energy stocks like Exxon Mobil and Chevron managed to stay in the positive territory despite the pullback in oil markets.

After the market close, the railroad company CSX Corporation released its quarterly report, beating analyst estimates on both earnings and revenue. The report may provide some support to the market as it shows that economic activity remains robust despite recession fears. The stock moved above the $28.50 level in the post-market session.

Snap is not in the S&P 500, but its report may have a material impact on market mood in the tech segment. Snap reported revenue of $1.13 billion and adjusted earnings of $0.08 per share, beating analyst estimates on earnings and missing them on revenue. The company has announced a $500 million buyback, but the market was not satisfied and the stock was down by 24% in the post-market session.

S&P 500 Settled Back Below The 20 EMA

S&P 500

From a big picture point of view, S&P 500 failed to settle above the 20 EMA and may try to gain additional downside momentum in the upcoming trading sessions. The key support level for S&P 500 is located at 3585. In case S&P 500 manages to settle below this level, it will continue its pullback and move towards the 3500 level.

On the upside, S&P 500 needs to settle back above the 20 EMA, which is located near the 3700 level. A move above the 20 EMA will provide S&P 500 with an opportunity to test the highs of the previous rebound near 3800.

For a look at all of today’s economic events, check out our economic calendar.

Are Cryptocurrency Payments the Future of Travel and Retail?

Key Insights:

  • Cryptocurrencies have become increasingly popular for investment and transactions over the last two years.
  • Owing to the growing consumer interest in crypto, online merchants and retailers have started accepting payments in bitcoin and other cryptocurrencies.
  • Cryptocurrencies rose to fame as a payment method in the retail and tourism sector. Still, will the bearish blues hamper the future?

Over the last couple of years, the cryptocurrency sector has gone from being a speculative asset class to achieving massive mainstream adoption. Cryptocurrencies such as bitcoin (BTC), ether (ETH), Dogecoin (DOGE), and a few others saw a meteoric rise both in terms of retail and institutional adoption.

Investors’ risk appetite rose when the 2020 bull run took off; since then, cryptocurrency payments have also witnessed a sheer rise in number. As cryptocurrencies rose to fame, in 2021 amid high market euphoria, the top cryptocurrency bitcoin made an all-time high of $69,000.

Consequently, over the last two years, cryptocurrencies have become increasingly popular for investment and transactions. In fact, despite the recent long-drawn bearish market, crypto transactions and investments have become a standard part of the finance landscape.

On 14 January this year, Tesla started accepting Dogecoin as a mode of payment on select merchandise. However, it’s not just big institutions or retail that are inclining towards crypto payments; of late, tourism has also been touched by the crypto wave.

Retail x Cryptocurrencies

Cryptocurrencies have gained traction in the financial world in recent years. A growing number of traditional investors have allowed payments in crypto for consumers and clients.

Bitcoin and a few altcoins are becoming widely accepted as consumers, and online stores realize the potential of digital currencies. A report released by Goldman Sachs in January 2022 predicts that the digital economy is an $8 trillion-dollar opportunity.

It’s no wonder that online merchants and retailers have started accepting payments in bitcoin and other cryptocurrencies owing to the growing consumer interest in the space. This also allows these firms to position themselves as developing brands in the blockchain and Web 3.0 space.

Surprisingly, Microsoft was one of the early adopters of bitcoin in 2014 when it began accepting the cryptocurrency as payment to buy games, apps, and other digital content in the Microsoft Store for platforms like Windows Phone and Xbox.

Interestingly, modern digital payments giant PayPal began accepting bitcoin in September 2014 — three months before Microsoft boarded the crypto train.

Additionally, several retailers like Whole Foods, Home Depot, GameStop, Newegg, Starbucks, and AT&T now accept bitcoin and other forms of cryptocurrency in their retail stores.

Recent data shows that, as of 2022, an estimated global crypto ownership rates at an average of 4.2%, with over 320 million crypto users worldwide. Quite a few global brands, institutions, and retailers have now started to accept or are in plans to shift to crypto payments.

Tourism x Cryptocurrencies

While the retail sector often takes the limelight when talking about crypto payments, retailers aren’t the only ones showing interest in the space; Cryptocurrencies, Web 3.0, and blockchain technology now have use cases across industries, including tourism. Not only has the travel industry embraced digital assets, but the intersection of the two sectors has also given rise to a new genre of operations – crypto tourism.

Crypto tourism includes funded or booked trips using cryptocurrencies or going to crypto-friendly destinations. The phenomenon also includes traveling for crypto and blockchain events, seminars, and conferences which have increased significantly over the last few months after the pandemic subsided.

Interestingly, several airlines, tour operators, and travel aggregators have begun accepting crypto payments. Emirates Airlines had announced that it would soon accept bitcoin as a mode of payment. While Latvian carrier and Air Baltic already accept crypto payments.

Latvian airline airBaltic was the world’s first airline to accept bitcoin payments for its flight tickets in 2014. Now the company also accepts ether and Dogecoin. Moreover, airfare websites like Cheapair.com and Travala.com also accept crypto payments. In addition to that, tours and activity booking sites like GetYourGuide have also started accepting payments in Dogecoin.

In fact, nowadays, crypto geeks are traveling to several crypto-friendly tourist destinations where digital payments are widely accepted. Crypto-friendly destinations include places like the Bahamas, which has its own digital currency called the Sand Dollar.

Is the Future Bright?

Looking at the growth of cryptocurrencies as a payment method over the last five years presents optimism for the future. However, the recent bear market blues have significantly affected the sector, bringing the cryptocurrency market cap down to a low of $887.24 billion at press time from a high of nearly $3 trillion last year.

The bearish sentiment and rising interest rates have made investors skeptical of entering risky asset markets. Nonetheless, looking at the long-term growth, it can be said that cryptocurrencies could play a crucial role in shaping the future of payments.

Best Telecom Stocks To Buy In May

Key Insights

  • Investors continue to search for safe-haven assets amid broad market sell-off. 
  • Telecom stocks offer solid dividend yields, which attract income-oriented investors. 
  • Verizon and AT&T are trading at reasonable valuation levels, which provides additional support to these stocks.

While S&P 500 continues to fall, several telecom stocks have managed to find support amid demand for safer investments and reliable dividends. As a result, Verizon and AT&T managed to outperform the S&P 500 in 2022 and have a decent chance to continue the current trend.

Verizon

Verizon  stock found itself under material pressure in late April after the company released its first-quarter report. The report met analyst estimates, but investors focused on the company’s weaker guidance.

As a result, the stock dropped towards the $46 level. However, the company’s strong dividend provided sufficient support to the stock, which moved back towards the $50 level.

Currently, Verizon yields more than 5%, which makes the stock attractive for income-oriented investors. The safe dividend created enough demand for Verizon shares during the recent sell-off in the broader market, and this catalyst will likely continue to support Verizon in the upcoming weeks.

AT&T

AT&T stock has significantly outperformed S&P 500 this year. Investors bet that the company’s business will rebound after the recent problems, while the solid dividend yield of more than 5% provides additional support to the stock.

It should be noted that analyst estimates have been moving lower in recent months. Currently, analysts expect that AT&T will report earnings of $2.59 per share in the current year and $2.55 per share in the next year, so the stock is trading at 8 forward P/E.

Typically, declining earnings estimates serve as a bearish catalyst for the stock. However, a combination of an attractive dividend yield and cheap valuation has provided enough support to AT&T stock and pushed it to yearly highs.

To keep up with the latest earnings updates, visit our earnings calendar.

T-Mobile Nears Intermediate Breakout

T-Mobile US Inc. (TMUS) is trading higher by less than 2% in Wednesday’s pre-market session after KeyBanc Capital Markets upgraded the stock to ‘Overweight’ from ‘Sector Weight’. The rally is setting off an important test at February resistance in the upper 120s, with a breakout signaling the next leg of an uptick that started near 100 in January. Notably, international tensions have barely affected the stock’s recent performance, with their domestic exposure acting as a safe haven for global-weary investors.

Long-term Competitive Advantage

The telecom giant’s profit margins are growing in a saturated smartphone environment while the Sprint acquisition is generating material cash flow. The company is leading rivals Verizon Communications Inc. (VZ) and AT&T Inc. (T) in 5G performance and availability, with that competitive advantage looking sustainable in the long-term. TMUS is also buying back stock at a healthy pace and could add another $60 billion in shares between 2023 and 2025.

KeyBank analyst Brandon Nispel highlighted T-Mobile’s ‘best-in-class’ 5G rollout while noting “our August downgrade was based on the view that competition in wireless was increasing, expectations for growth were high, and valuation represented too substantial of a premium. While we still see the wireless market as increasingly competitive from cable, we believe the company should continue to take substantially more share than AT&T and Verizon.”

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Buy’ rating based upon 26 ‘Buy’, 1 ‘Overweight’, 3 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $106 to a Street-high $230 while the stock is set to open Wednesday’s session more than $35 below the median $165 target. This modest placement bodes well for continued upside in the second quarter, with a potential ramp-up into May’s Q1 2022 earnings release.

T-Mobile posted strong gains into February 2020, topping out at 101.35. It returned to that price level in May and broke out, carving a multiwave uptrend that hit an all-time high at 150.20 in July 2021. The subsequent decline sliced one-third off the stock’s value into the January 2022 low, ahead of a bounce that quickly reached 200-day moving average resistance. Recent price action has crisscrossed that contested level multiple times, with a breakout signaling a major improvement in technical tone.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

NYSE Files NFT and Metaverse Related Trademark Applications

The flurry of NFT and the Metaverse related activity continue to hit the news wires this week. As activity grows, trading volumes and lucrative fees also rise, drawing the interest of mainstream market places.

The New York Stock Exchange

Located on Wall Street, the NYSE is the world’s largest stock exchange. Founded under a buttonwood tree in 1792, the exchange evolved from a group of just 24 stockbrokers and adopted its current name in 1863. Ownership was controlled by members, capped at 1,366 since 1953 until members became shareholders in December 2005. In anticipation of a change in structure, some seats on the exchange sold for as much as $4m. Significantly, the exchange was an instrumental part of the U.S industrial revolution.

On the regulatory front, it was the 1929 crash that placed the NYSE under the purview of the Securities and Exchange Commission (SEC).

The NYSE and U.S Companies Pave the Way for NFTs and the Metaverse

Ahead of the NYSE application, a number of U.S listed companies have filed similar trademark applications. These include Microsoft (MSFT), Warner Brothers (AT&T), and McDonald’s (MCD). Back in April 2021, even the NYSE minted NFTs in celebration of first trades for Coupang, DoorDash, Roblox, Snowflake, Spotify, and Unity. Each NFT is a short video clip providing details of the first trade. The Spotify NFT is viewable on Crypto.com (CRO).

NYSE Looks to Expand to NFTs and the Metaverse

Late last week, the New York Stock Exchange filed a trademark application that suggests new endeavors in NFTs and the Metaverse.

According to the trademark application, the NYSE aims to provide an online market place for buyers, sellers, and traders of:

  • Downloadable digital goods authenticated by NFTs;
  • Virtual and digital assets, artwork, collectibles, and NFTs;
  • Digital currency, virtual currency, cryptocurrency, digital tokens, crypto tokens, and utility tokens.
  • Downloadable digital art images authenticated by NFTs.

Additionally, the application requests for

  • Developing and designing virtual retail stores, virtual stores, and virtual showrooms.

With regulatory scrutiny on the rise, the New York Stock Exchange’s expansion into NFTs and the Metaverse will be an interesting one to watch.

Why AT&T Stock Is Down By 5% Today

AT&T Stock Falls As Company Announces WarnerMedia Spin-Off And Cuts Dividend

Shares of AT&T gained downside momentum after the company announced that it would spin off its interest in WarnerMedia to shareholders at closing of the merger with Discovery.

AT&T shareholders will receive an estimated 0.24 shares of Warner Bros. Discovery (WBD) common stock for each share of AT&T they own. As a result, AT&T shareholders will own approximately 71% of the new WBD. After the transaction is closed, WBD is expected to be listed on the NASDAQ Global Select Market under the ticker “WBD”.

AT&T John Stankey commented: “In evaluating the form of distribution, we were guided by one objective – executing the transaction in the most seamless manner possible to support long-term value generation”.

After the transaction is completed, AT&T expects to pay an annual dividend of $1.11 per share, down from the previous dividend of $2.08 per share.

What’s Next For AT&T Stock?

AT&T stock is one of the popular dividend plays, so it’s not surprising to see that the market reacted negatively to the dividend cut. After the dividend cut, the stock will yield about 4.5%.

This is a rather attractive yield compared to the current yield of S&P 500, which is below 1.50%. However, AT&T stock underperformed S&P 500 for years, and it remains to be seen whether the current yield will attract new investors at a time when Treasury yields are moving higher and the market expects rate hikes from the Fed.

In this light, it remains to be seen whether speculative traders and investors will rush to buy AT&T stock after the recent pullback. The stock is trading at levels seen back in the 2000s, and it looks that many market players have lost confidence in the stock’s ability to show sustainable upside momentum.

For the market, the main event of the day is the dividend cut rather than the ongoing transformation, so AT&T will have to come up with positive catalysts for its stock to have a chance to move higher.

For a look at all of today’s economic events, check out our economic calendar.

Monstrous Earnings Ahead: IBM, Microsoft, Intel, Tesla, Apple, Visa in Focus, Along With The Fed

Investors will focus on Q4 earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could also hit the stock market hard next week, making the big tech earnings that much more critical. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant in order to see how it impacts earnings in 2022. The following is a list of earnings slated for release January 24-28, along with a few previews.

Earnings Calendar For The Week Of January 24

Monday (January 24)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company, International Business Machines, is expected to report its fourth-quarter earnings of $3.39 per share, which represents year-over-year growth of over 60% from $2.07 per share seen in the same period a year ago.

The world’s largest computer firm’s revenue would decline over 21% to $1.96 billion from $20.37 billion a year earlier. It is worth noting that the technology company has beaten earnings in most of the quarters in the last two years, at least.

International Business Machines (IBM) 4Q earnings will be focused on standalone model mechanics and whether Software revenue can re-accelerate while Consulting demand sustains. However, we believe the setup becomes more attractive in 2H21. We update our estimates to reflect IBM standalone post-KD spin,” noted Katy Huberty, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 24

TICKER COMPANY EPS FORECAST
BRO Brown & Brown $0.38
BOH Bank of Hawaii $1.39
BMRC Bank of Marin Bancorp $0.57
CR Crane $1.12
HAL Halliburton $0.34
HMST HomeStreet $1.3
IBM International Business Machines $3.39
PETS PetMed Express $0.3
SMBK SmartFinancial $0.48
STLD Steel Dynamics $5.66
TRST Trustco Bank $0.74
ZION Zions Bancorp $1.33

 

Tuesday (January 25)

IN THE SPOTLIGHT: MICROSOFT

The Redmond, Washington-based global technology giant, Microsoft, is expected to post its fiscal second-quarter earnings of $2.28 per share, which represents year-over-year growth of over 12% from $2.03 per share seen in the same period a year ago.

The world’s largest software maker would post revenue growth of nearly 17% to around $50.3 billion. It is worth noting that with a track record of always beating earnings per share estimates in the last five years, Microsoft is one of the best FAANG stocks in terms of earnings surprises.

“We model Azure growth of 45% cc & see 2-3% of upside, translating to steady growth vs. 48% last qtr. We see potential for strong M365 demand ahead of price hikes, as well as continued execution from LNKD, PowerApps & Dynamics ERP. Although tougher PC/Server dynamics, we expect strengthening trends for C22. Expect Mar Q guide slightly above Street,” noted Derrick Wood, equity analyst at Cowen.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 25

TICKER COMPANY EPS FORECAST
MMM 3M $2.07
AGYS Agilysys $0.13
AXP American Express $1.75
ADM Archer Daniels Midland $1.19
BXP Boston Properties $1.51
CNI Canadian National Railway $1.25
COF Capital One Financial $5.15
FFIV F5 $1.97
GE General Electric $0.84
JNJ Johnson & Johnson $2.12
LMT Lockheed Martin $8.04
LOGI Logitech International $1.23
NAVI Navient $0.81
NEE NextEra Energy $0.41
VZ Verizon Communications $1.28
WSBC WesBanco $0.67

 

Wednesday (January 26)

IN THE SPOTLIGHT: FOMC MEETING CONCLUDES, INTEL, TESLA

Tuesday and Wednesday will mark the first meeting of the Fed’s policymaking arm in 2022. At around 7:30 pm GMT on Wednesday, Jerome Powell will conduct a press conference. This is expected to be the biggest market event since investors expect more details about the central bank’s plan to raise interest rates.

INTEL: The California-based multinational corporation and technology company is expected to report its fourth-quarter earnings of $0.9 per share, which represents a year-over-year decline of about 40% from $1.52 per share seen in the same period a year ago. The company’s revenue would fall nearly 8% to $18.39 billion.

Intel remains controversial. Long-term skepticism remains and share losses will continue until products ramp on the Intel 4 node (old 7nm), but with a new CFO, improving PC and server market outlooks, cash inflows from the US Govt, Mobileye on the horizon, and a February analyst day now reconfirmed, we are cautiously optimistic sentiment can continue to gradually improve. Still LOTS to prove,” noted Matthew D. Ramsay, equity analyst at Cowen.

TESLA: The California-based electric vehicle and clean energy company is expected to report its fourth-quarter earnings of $2.31 per share, which represents year-over-year growth of 180% from $0.80 per share seen in the same period a year ago.

“Q4 results on 26 Jan are critical to validate (or not) the Q3 profit dynamics that could see Tesla 1) carve out meaningful share from legacy OEMs busy protecting their own share by ramping up BEVs and 2) claim a disproportionate share of the industry profit pool. We raise 2021-23 EBIT and FCF 10%, mostly on higher volume,” noted Philippe Houchois, equity analyst at Jefferies.

The high-performance electric vehicle manufacturer would post revenue growth of over 50% to $16.65 billion. The electric vehicle producer has beaten earnings estimates only twice in the last four quarters.

Tesla 4Q deliveries were 20% above our forecast, annualizing to over 1.2mm units, which is already above our prior FY22 forecast. We raise our forecasts and target to $1,300 on this ‘opening act’ and look for more in FY22,” noted Adam Jonas, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 26

TICKER COMPANY EPS FORECAST
ABT Abbott Laboratories $1.16
ANTM Anthem $5.11
AZPN Aspen Technology $1.41
T AT&T $0.76
KMB Kimberly-Clark $1.29
LRCX Lam Research $8.46
RJF Raymond James Financial $1.77
STX Seagate Technology $2.21
NOW ServiceNow $0.22
SIMO Silicon Motion Technology $1.56
SLG SL Green Realty $1.56
URI United Rentals $6.97
VRTX Vertex Pharmaceuticals $2.92
WHR Whirlpool $5.84

 

Thursday (January 27)

IN THE SPOTLIGHT: APPLE, VISA

APPLE: The consumer electronics giant would post its fiscal first-quarter earnings of $1.88 per share, which represents year-over-year growth of nearly 12% from $1.68 per share seen in the same period a year ago.

The iPhone manufacturer would post revenue growth of 6% to $118.13 billion. It is worth noting that with a track record of always beating earnings per share estimates in the recent five years, Apple is the best FAANG stock in terms of earnings surprises.

Apple is expected to report 1QFY22 earnings after market on Thursday, January 27th and host a call with investors at 5:00 PM ET. In our view, the recent strength in shares is a reflection of investors’ willingness to reward Apple for entering new markets, including electronic vehicles (EV) and the metaverse (with an augmented reality/virtual reality product). Now, we look for comments from management on its future product roadmap to justify the increase in share price,” noted Tom Forte, Senior Research Analyst at D.A. DAVIDSON.

“We are reiterating our BUY rating for Apple (AAPL) and putting our price target of $175 under review ahead of the company reporting 1QFY22 earnings.”

VISA: The world’s largest card payment company is expected to report its fiscal firth-quarter earnings of $1.70 per share, which represents a year-over-year decline of about 20% from $1.42 per share seen in the same period a year ago.

The global technology payment company would post revenue growth of nearly 19% to $6.8 billion. It is worth noting that the company has beaten earnings in most of the quarters in the last two years, at least.

Visa (V) is one of our preferred stocks, as it is a key beneficiary of resilient global consumer spend growth, the ongoing shift from cash to electronic payments, and broadening merchant acceptance. Global Personal Consumption Expenditure and secular growth drivers should support low double-digit revenue growth in the near-to-medium term,” noted James Faucette, equity analyst at Morgan Stanley.

“While Covid-19 headwinds are likely to persist, we see upside opportunity from the faster-than-expected recovery of travel. Continued investment in longer-term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM and offer an opportunity for compounding double-digit earnings growth for the foreseeable future.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 27

TICKER COMPANY EPS FORECAST
AOS A.O. Smith $0.77
ALK Alaska Air Group $0.21
BX Blackstone $1.3
CNX CNX Resources $0.5
CMCSA Comcast $0.73
DOW Dow $2.16
EMN Eastman Chemical $1.88
HCA HCA Healthcare $4.57
IP International Paper $1.02
JBLU JetBlue Airways $-0.39
MA Mastercard $2.2
MCD McDonald’s $2.32
LUV Southwest Airlines $-0.39
X U.S. Steel $5.12
V Visa $1.7

 

Friday (January 28)

TICKER COMPANY EPS FORECAST
ALV Autoliv $1.18
BAH Booz Allen Hamilton $0.97
CAT Caterpillar $2.23
CHD Church & Dwight $0.59
CL Colgate-Palmolive $0.79
RDY Dr. Reddy’s Laboratories $0.64
GNTX Gentex $0.33

 

Why AT&T Stock Is Up By 4% Today

The Number Of HBO Max And HBO Subscribers Exceeds Guidance

Shares of AT&T gained strong upside momentum after the company revealed that that it ended the year with approximately 73.8 million total global HBO Max and HBO subscribers. The previous guidance was 70 million – 73 million subscribers.

However, it should be noted that the main driver behind the recent rise in AT&T shares is the relief over the future of 5G deployment. Verizon and AT&T have recently agreed to delay 5G deployment due to safety concerns from the aviation industry, but the market believes that both companies are close to the finish line.

Verizon stock has also enjoyed strong upside momentum in recent trading sessions, so the 5G story seems to be the main catalyst for these two stocks, while the recent news on the number of HBO subscribers serve as an additional positive factor for AT&T stock.

What’s Next For AT&T Stock?

Analysts expect that AT&T will report earnings of $3.21 per share in 2022, so the stock is trading at roughly 8 forward P/E. It should be noted that there is some rotation into more traditional, value-oriented plays at the beginning of this year, which is bullish for AT&T.

For example, stocks like Alphabet and Microsoft have recently pulled back from highs while Coca-Cola stock rallied. In case this rotation continues, AT&T stock will get more support.

The company’s valuation remains attractive, and its current quarterly dividend of $0.52 per share makes it an interesting play for income-oriented investors.

It looks that the stock has suffered from tax loss selling at the end of 2021, but it was able to get more support when this catalyst was no longer in play.

Technically, RSI for AT&T stock has recently moved into the overbought territory, so the risk of a near-term pullback is increasing. Fundamentally, cheap valuation, expectations of 5G deployment and attractive yield may provide more support at AT&T stock in the upcoming months.

For a look at all of today’s economic events, check out our economic calendar.

Sector Themes In Play In The Markets For 2022

Years like 2021 saw a solid broad-based performance in many stock market sectors. Relatively simple approaches such as Indexing and Sector Rotation did well. But with macro changes in play and many uncertainties for 2022, we may very well see broad indexes underperforming while individual sectors dominated by a few stocks really shine.

Dips will continue to be bought unless something significant changes. But let’s not forget that we’re long overdue for a substantial correction. Significant risk catalysts are:

  • Fed actions.
  • International conflicts (i.e., Russia and China).
  • Pandemic developments that are not currently known.

There’s always the risk of the unknown – the literal definition of a “Black Swan” event. We shouldn’t get too complacent, knowing that we may need to get defensive to protect capital suddenly. When it’s time to be defensive, let’s not forget that CASH IS A POSITION!

Sector theme DRIVERS FOR 2022

Many uncertainties about Covid and the lingering effects on the economy remain. Inflation has roared back to 30-year highs. Strong employment numbers and consumer spending are fueling significant growth in corporate earnings. We also have a shift in bias at the Fed on interest rates and quantitative easing. These are the “knowns” and are theoretically priced in.

For these reasons and more, we should expect more of a “Stockpicker’s Market” in 2022. Certain sectors will do well and weather corrections better than the broader markets.

Even short-term traders can gain an edge by paying attention to what sectors are strongest. Traders tend to benefit most from playing the strongest stocks in the strongest sectors for bullish trades and choosing the weakest stocks in weaker sectors for bearish trades. That “tailwind” can make a significant difference in results.

Let’s look at some sector themes and individual names to keep an eye on in 2022.

ECONOMIC NORMALIZATION

A long-anticipated return to a “normal” economy will continue to be a theme — we just don’t know if that will be Post-Covid or Co-Covid. Or when. Air travel, theme parks, hotels, cruise lines, etc., have all suffered in the persistent Pandemic. What does seem to be changing is the idea of a “new normal” where virus variants may be with us for years to come. We will adjust socially and economically to that for the foreseeable future. DAL, UAL, LUV, AAL are airlines to watch, and the JETS ETF may be a good way to play a general recovery in this sector.

5G INTERNET

The much-hyped rollout of 5G network technology had its share of setbacks and technology disappointments. But 2022 should see the 5G deployment start to take off as technical issues are worked out, and the promise of widespread coverage with transformational performance becomes real. In the background supplying the 5G infrastructure are AMD, QCOM, ADI, MRVL, AMT, XLNX, and KEYS. Along with infrastructure and testing companies, shares of major carriers T, TMUS, and VZ languished for much of the second half of 2021 and looked poised for recovery in the coming year.

ARTIFICIAL INTELLIGENCE

In all its various forms (including autonomous vehicles), AI will remain a developing trend. Big players in the space to watch include MSFT, AMAT, GOOGL, NVDA, AAPL, and QCOM.

EVs and AUTONOMOUS VEHICLES

Electric Vehicles (EVs) are nearing an inflection point where widespread adoption is poised to take off. Technology and cost competitiveness has improved where some EVs will reach price parity with their traditional internal combustion counterparts.

While there are many smaller players in the EV space, automotive stalwarts F, GM, and TM are investing very heavily. TSLA has been grabbing the headlines, but many others want to stake out their territory in the space, including whole tiers of manufacturers and infrastructure enablers like WKHS, XPEV, NKLA, and CHPT.

MATERIALS and MINING

Gold, silver, and related miners underperformed for much of 2021 and now look poised for a recovery year as inflation, and monetary concerns grow. GLD, SLV, GDX, GDXJ, SIL, SILJ look good as both longer and mid-term plays. Metals and miners may get hit initially with a significant downturn in stocks but could ultimately demonstrate their safe-haven potential.

Specific to the growth in EVs, battery technology, etc., copper, lithium, and related basic materials should see stronger demand ahead. FCX looks particularly interesting as a dual play on gold and copper. LIT may be a good ETF play on lithium battery technology.

SEMICONDUCTORS

The market for chips is primed for exponential growth. EV’s have about ten times the number of specialty semiconductors as conventional vehicles. AI, crypto, 5G, mobile devices, and ubiquitous computing should drive growth in the semiconductor sector for some time to come.

REAL ESTATE

Real Estate and Homebuilders should continue to do well while employment numbers remain strong and if interest rates don’t rise too quickly. The inventory shortage in most real estate markets will likely persist well into the new year.

Storage REITs like PSA, LSI, and CUBE have been big winners in the Covid economy and still have room to run.

SUMMARY

Many sectors still look bullish after gains in 2021. But there are “storm clouds” on the horizon, and we must not take future performance for granted.

Lastly, one of the simplest ways to assess how sectors are measuring up is to watch the charts for the S&P SPDR series sector ETFs and a few others. Here are some notable ones to watch:

https://www.thetechnicaltraders.com/wp-content/uploads/2021/12/Dec-31-article.png

These can give us a good starting place to look for leading stocks in winning sectors as the year unfolds.

Let’s remain vigilant for possible market corrections and may the wind be at our backs!

Want to learn more about our Options Trading Service?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. The head Options Trading Specialist Brian Benson, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to check it out, click here: TheTechnicalTraders.com.

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist
TheTechnicalTraders.com

 

What Can You Buy With Cryptocurrencies?

The cryptocurrency market has become one of the leading financial markets in the world, thanks to its recent growth. The industry is worth more than $2 trillion, and with this level of growth comes the adoption. However, despite the growing popularity of cryptocurrencies, some people still don’t know what they can purchase with their crypto.

To address those concerns, this article informs you of the various places where you can pay with cryptocurrencies.

Cryptocurrencies are accepted in many sectors

A decade ago, Bitcoin was a relatively unknown financial asset. However, nowadays, it is known in every part of the world and is slowly going mainstream. With the mainstream adoption of cryptocurrencies increasing, it became easier to pay for goods and services using Bitcoin and other cryptos.

El Salvador became the first country to make Bitcoin a legal tender, and you can pay for anything with BTC. The United States, Canada, Spain, the United Kingdom, South Korea, and Singapore are amongst the countries that are also recording an increase in cryptocurrency transactions. Here are some of the ways to use your cryptocurrencies to pay for goods and services.

Technology and Ecommerce

One of the areas where you can easily spend your cryptocurrencies is technology and eCommerce. eCommerce companies are making it easier for their customers to pay for their products using BTC and other cryptocurrencies.

Overstock is one of the leading retailers that allows users to pay for their products with crypto, thanks to its partnership with Coinbase. NewEgg is an online retailer of technology products like computer hardware and consumer electronics, where you can use your bitcoins to pay for these products. Alza, the leading online retailer in the Czech Republic, and Japan’s Rakuten are other top retailers that accept cryptocurrencies.

If you wish to pay for your domain name in bitcoin, then Namecheap is the hosting company you should patronize. The Internet Archive also allows users to access web archives and accepts bitcoin donations.

AT&T is one of the first major mobile carriers globally to enable its users to pay for services using cryptocurrencies. The company partnered with BitPay to provide the crypto payment option to its subscribers.

Tech giant Microsoft allows its users to top up their Microsoft account using cryptocurrencies. The company suspended the service for a while but reactivated it as the adoption of BTC and other cryptos grew.

Dish, one of the leading TV service providers in the United States, allows users to pay for their cable subscription using Bitcoin, thanks to its partnership with Coinbase.

Entertainment sector

One of the areas where cryptocurrencies have gained adoption is the entertainment sector. It is becoming easier to pay for services using bitcoin and other cryptos in this industry. AMC, one of the leading cinema chains globally, now allows people to pay for movie tickets and other services with a few cryptos such as BTC, ETH, SHIB, and DOGE.

Amazon-owned leading game streaming platform Twitch is another place where you can pay for services using Bitcoin. The company briefly removed the service in March 2019 but has re-enabled it in June 2020.

Food Industry

Another area where cryptocurrency adoption is growing is the food sector. Several fast-food joints are now accepting Bitcoin and other cryptocurrencies as payment options for their products.

Burger King Venezuela partnered with Cryptobuyer to accept cryptocurrencies as a mode of payment. Their customers can pay in Bitcoin, Dash, Litecoin, Ethereum, and Tether. Pizza Hut is another giant pizza franchise that allows customers to pay for their food with Bitcoin.

KFC Canada is another major fast-food company that accepts Bitcoin as payment for its products. The company partnered with BitPay to process the payments. Denver-based Quiznos partnered with Bakkt to launch a pilot that allows customers to purchase food with bitcoin via the Bakkt app.

Sports

Cryptocurrency companies have penetrated the sports industry. Over the past few months, crypto companies such as FTX and Crypto.com have partnered with numerous sporting institutions to increase the awareness of cryptocurrencies.

The adoption goes beyond sports entities partnering with cryptocurrency companies. Some sporting institutions now accept cryptocurrency payments. The Dallas Mavericks accepts Bitcoin as a payment method for both game tickets and merchandise, and BitPay processes cryptocurrency payments via the team’s website.

The Miami Dolphins is another team that allows you to pay for game tickets using Bitcoin and Litecoin.

Portuguese-based football team Benfica is one of the first soccer institutions in Europe to accept Bitcoin for game tickets and merchandise.

Travel and Hospitality

The hospitality industry is one of the biggest promoters of cryptocurrencies. Richard Branson’s Virgin Mobile and Virgin Airlines allow you to pay for space travel with BTC. Norwegian Air Shuttle (Norwegian), Scandinavia’s largest airline and Europe’s third-largest budget airline, is another travel company that allows customers to pay for tickets with cryptocurrency.

CheapAir, one of the leading online travel agencies in the United States, partnered with Coinbase to allow its customers to pay for travel and hospitality services with Bitcoin. Travala and Bitcoin.Travel are two other leading online travel agency that permits their customers to pay for services using BTC and a few other cryptocurrencies.

Real Estate and Art

An increasing number of real estate firms accept cryptocurrencies as payment for their properties. Cryptocurrencies have also penetrated the art world. British auction house Christie’s now accepting Bitcoin and Ether for some of its paintings, both physical and digital.

Gift Cards and VPNs

The other sectors where cryptocurrencies have gained adoption are VPN and gift cards. Gyft allows users to buy and sell gift cards online for top retailers like Amazon, iTunes and Starbucks, and the company accepts Bitcoin as payment for its services.

ExpressVPN, CyberGhost, NordVPN, and PrivateVPN are some of the leading VPN service providers that allow users to pay for their services and upgrade their accounts using Bitcoin and a few other selected cryptocurrencies.

Final Thoughts

The use of cryptocurrencies to pay for goods and services is becoming increasingly popular. Businesses are beginning to accept cryptocurrency payments directly or through third-party processors like BitPay, a trend that seems set to continue through 2022.

 

Marketmind: Back to The Blues

Markets are in a somber mood on Thursday.

There is little let up on the Chinese property sector front with investors wondering how much damage the Chinese economy might suffer from a potential default of embattled property giant China Evergrande Group – now possibly just days away.

Evergrande shares suffered a double-digit tumble after it scrapped a deal to sell a stake in its property group, though it also secured an extension on a defaulted bond, according to media reports.

Adding to the woes is resurgence of COVID-19 and ensuing curbs. Russia is suffering record deaths and has reported some COVID-19 infections with a new coronavirus variant believed to be even more contagious than the Delta one.

Poland is facing an explosion of cases that may require drastic action, according to its health minister, while Latvia starts its lockdown today until mid-November to slow a spike in infections.

Futures point to more pain ahead for U.S. stocks later in the day.

But a batch of fresh earnings results might sooth some frayed nerves.

Unilever and Hermes sales beat estimates, Truck maker Volvo profit beats forecast, but companies do flag lingering chip woes.

Barclays Q3 beats expectations on strong investment bank performance, while Anglo American Q3 production inches higher.

Earnings highlights in the U.S. to come today are Intel, AT&T and Danaher.

In emerging markets, Turkey’s central bank will take centre stage. Policy makers are expected to deliver another interest rate cut despite stubbornly high inflation after President Tayyip Erdogan’s midnight reshuffle of the monetary policy committee.

Key developments that should provide more direction to markets on Thursday:

-EU starts two day summit

-NATO defense ministers meet

-U.S. initial jobless claims/Philly Fed index/existing home sales

-U.S. 5-year TIPS auction

-Fed speakers: San Francisco President Mary Daly

-Emerging markets: Turkey, Ukraine central banks

-U.S. earnings: AT&T, Blackstone, Dow, American airlines, Southwest airlines, Alaska Air, Intel Whirlpool Mattell

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Karin Strohecker)

Is It Time to Buy AT&T?

AT&T Inc. (T) reports Q3 2021 earnings on Thursday morning, with analysts looking for a profit of $0.80 per-share on $42.24 billion in revenue. If met, earnings-per-share (EPS) will mark a slight improvement compared to the same quarter in 2020. The stock booked a small gain after beating Q2 top and bottom line estimates in July but quickly turned tail, dropping more than 10% into last week’s 11-year low in the mid-20s.

Income-Minded Shareholders Hit the Exits

The telecomm giant rallied to a 52-week high in May after announcing a merger with Discovery Inc. (DISCA). The news triggered a flurry of upgrades but the mood soured after analysts realized the dividend would need to be slashed to complete the transaction. Income-minded shareholders headed for the exits, triggering a steep slide that relinquished more than 25% of the stock’s value into the October low. The merger is expected to close in the middle of 2022.

KeyBanc analyst Brandon Nispel just upgraded the stock to ‘Sector Weight’, citing reasons that make it tough to justify further downside. As he notes, “AT&T currently trades at <$20 post-Warner Media spin, or <6x our 2023 pro-forma adj. EBITDA, and it appears more difficult to justify further downside from current levels given: 1) simplification of the business; 2) reduced leverage; and 3) peers that trade at premiums. While we do not recommend owning AT&T and see modest downside to our $25 FV, further downside might support a more positive risk/reward.”

Wall Street and Technical Outlook

Wall Street consensus has grown highly bearish since May, dropping to a ‘Hold’ rating based upon 5 ‘Buy’, 2 ‘Overweight’, 18 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts are recommending that shareholders close positions. Price targets currently range from a low of $23 to a Street-high $37 while the stock is set to open Wednesday’s session less than $3 above the low target. This placement matches the KeyBanc view of limited downside.

AT&T tested the 2007 high in the 40s in 2016 and reversed, entering a decline that found support at 26.18 in 2018. It undercut that level by 78 cents during 2020’s pandemic decline and posted the second lower high since 2016 in May 2021. The selloff into October has undercut the 2018 and 2020 lows, dropping the stock to the lowest low since July 2010. A rally above 27 will set off a buy signal in this scenario but the 2008 bear market low near 21 may still come into play.

For a look at today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Apple Could Lose Ground in the Fourth Quarter

Dow component Apple Inc. (AAPL) posted an all-time high on Wednesday following an analyst upgrade, lifting its 2021 year-to-date return to 16.4%. Bullish summer sentiment throughout the big tech universe has underpinned this uptick, which is also feeding on positive reaction to the iPhone 12 Pro, released in the October 2020. However, there are technical dents in the icon’s shiny armor, raising odds that bears will take control in the fourth quarter.

Strong Upgrade Cycle

Analysts estimate that Apple has added 3% market share in China at the expense of Huawei, which now controls about 8% of sales. Here in the United States, telecom providers AT&T Inc. (T), Verizon Communications Inc. (VZ), and T-Mobile US Inc. (TMUS) have restarted aggressive promotions to existing customers, generating a positive impact on upgrade rates. Growing competition for 5G phones should force these companies to extend promotions well into the iPhone 13 product cycle.

Wolfe Research analyst Jeff Kvaal upgraded Apple to ‘Peer Perform’ on Wednesday, noting “we lift our FY22 iPhone unit/ASP assumptions from 228mn/$824 to 232mn/$833 given well-aligned US promotions and ongoing share gains. This translates into 4.6% sales growth and EPS of $5.85 (consensus 3.3%/$5.64). Recent PC results indicate demand remains well ahead of supply. We consider both products on a permanently higher trajectory as ~50% of shipments through the pandemic have been to new users”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after 2020’s historic 80% return, based upon 27 ‘Buy’, 5 ‘Overweight’, 9 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $90 to a Street-high $190 while the stock is set to open Thursday’s session about $15 below the median $168 target.  Closing the distance into the median target could be tougher than it looks, given technical red flags.

Apple broke out above the January 2020 high at a split-adjusted 81.96 and entered an historic advance that stalled in the upper 130s in September. The stock has added just 16 points in the last 12 months, posting an all-time high at 154.98 on Wednesday. The rally has nearly reached the trendline of rising highs over that period, exposing hidden resistance. More importantly, buying pressure has gone to sleep, slumping well below October 2020 and January 2021 peaks, suggesting it will take little energy to generate a major downdraft.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Today’s Market Wrap Up and a Glimpse Into Thursday

This rally may have legs after all. Stocks extended their gains from yesterday’s monstrous rebound, with all three major indices finishing the day in the green. The S&P 500 was up fractionally and inched closer to its all-time high. The Dow Jones Industrial Average gained almost 300 points while the tech-heavy Nasdaq was up nearly 1%.

Corporate America has taken the attention away from the one-two punch of the Delta variant and inflation, as the earnings parade continues to roll on.

Oil is trading above the USD 70 threshold once again after gaining close to 5% on the day. The VanEck Vectors Oil Services ETF climbed higher by 4.5% and is up in extended-hours trading as well. This ETF has also rebounded 10% since its low point on Monday.

Elon Musk and Jack Dorsey were in the spotlight as they participated in “The B Word” event about bitcoin. Musk tipped his hand to his space travel company, SpaceX, owning bitcoin, as does he and Tesla. The attention did little for the Tesla stock price today but bitcoin is having a nice run.

Stock futures are little changed in extended-hours trading.

Stocks to Watch

AT&T will report its Q2 results before the opening bell. The company on Wednesday announced plans to offload Vrio, its Latin American DirecTV arm amid a USD 4.6 billion impairment charge. The telecom giant sold the business to Grupo Werthein.

US Steel advanced 4.5% on Wednesday and is higher in after-hours trading. Since the bottom fell out of the stock market on Monday, US Steel shares are up 12% from their lowest point. Steel prices have been hovering at record highs amid supply constraints, conditions that are expected to persist.

Look Ahead

Existing Home Sales for June come out at 10 a.m. ET. This indicator has been on the decline for four straight months but still hovers at a solid annual rate of 5.8 million units. Wells Fargo economists predict sales moved higher last month to a rate of 6.06 million units thanks to “demand for extra space” coupled with low rates.

The Leading Economic Index (LEI) for June also comes out on Thursday. In light of a “mixed bag of economic data” in recent weeks, Wells Fargo economists forecast that this indicator increased 0.8% last month.

 

Why Shares Of AT&T Are Up By 5% Today?

AT&T Video 22.04.21.

AT&T Stock Gains Ground After Strong Quarterly Report

Shares of AT&T gained upside momentum after the company released its first-quarter results. AT&T reported revenue of $43.9 billion and GAAP earnings of $1.04 per share, beating analyst estimates on both earnings and revenue. The company’s free cash flow totaled $5.9 billion.

AT&T showed strong results in communications and media segments. HBO Max added 2.7 million domestic subscribers, which was a positive surprise after the recent disappointing results from Netflix. Currently, HBO Max has 44.2 million domestic subscribers and nearly 64 million globally.

The company has also issued guidance for 2021. AT&T expects that its consolidated revenue will grow in the 1% range on a comparative basis. Adjusted EPS should be close to 2020 level. Free cash flow is expected to be in the $26 billion range, while the full-year total dividend payout ratio is projected to be in the high 50’s% range.

What’s Next For AT&T?

AT&T has certainly managed to surprise investors with a strong quarterly report. AT&T shares are traditionally viewed as a solid dividend play but investors often have questions about the company’s growth perspectives.

The recent results suggest that AT&T continues to find ways to grow its revenue and deliver strong free cash flow performance. At current prices, AT&T yields about 6.6%, which is sufficient enough to attract yield-oriented investors.

The dividend payout ratio remains at comfortable levels while the company’s business performs well which should attract more interest to the company’s stock.

It should be noted that AT&T shares remain far from pre-pandemic levels, and they have been mostly range-bound between $26 and $32 since March 2020. The strong quarterly report may serve as the catalyst that will ultimately push the stock out of this range. In this case, AT&T stock may also attract momentum traders who will help it get to higher levels.

For a look at all of today’s economic events, check out our economic calendar.

AT&T Beats Revenue Estimates as Reopening Helps Phone Sales

By Sheila Dang and Akanksha Rana

The company said on Thursday it added 595,000 net wireless phone subscribers in the first quarter, more than double what analysts had expected.

Shares of AT&T surged 4.25% to $31.40 in premarket trading.

AT&T’s controversial move to make its entire 2021 theatrical movies slate available to its streaming customers at the same time helped the company attract 2.7 milllion new subscribers for HBO and HBO Max.

The services now have a total of 44.2 million U.S. subscribers, AT&T said.

Its movie release of “Godzilla vs. Kong” has generated over $80 million at the U.S. box office and over $300 million globally as the No. 1 film over the past three weekends.

Shares of streaming rival Netflix sank 11% on Monday after it reported a sharp slowdown in new customer additions globally. In the U.S. and Canada, Netflix added 450,000 new paid subscribers.

AT&T has been investing heavily in its new 5G wireless network and bundling its streaming service HBO Max for free with certain phone plans to retain customers and keep them from switching to competitors.

Wireless phone churn, or the rate of customer defections, declined 0.1% in the first quarter to 0.76%. The improvements were, in part, due to the bundling of HBO Max to higher-priced phone plans.

Revenue for AT&T was up nearly 3% at $43.9 billion, beating analysts’ average estimate of $42.69 billion, according to IBES data from Refinitiv.

Excluding items, AT&T earned 86 cents per share, above analyst estimates of 78 cents.

WarnerMedia, which includes HBO, began to recover from the ravages of the pandemic during which sports events and movie productions were paused. Revenue for WarnerMedia rose 9.8% to $8.5 billion.

AT&T added 235,000 new fiber internet customers, as Americans continued to work from home during the pandemic, driving up demand for home Wi-Fi.

The company’s net debt rose to $169 billion at the end of the first quarter, due to its purchase of more wireless spectrum, or airwaves that carry data.

Separately, rival Verizon Communications Inc has said it lost more wireless subscribers than expected during the first quarter as it battled intense competition from T-Mobile US Inc and AT&T to attract customers.

(Reporting by Akanksha Rana in Bengaluru and Sheila Dang in Dallas; Editing by Kenneth Li, Shinjini Ganguli and Bernadette Baum)

AT&T Raises Global HBO Max and HBO Subscribers Forecast, Shares Gain Over 4%

AT&T raised its forecasts for global HBO Max and HBO subscribers to 120-150 million from the previous projection of 75-90 million, sending its shares up over 4% on Friday.

The company forecasts to launch HBO Max in 60 markets outside the United States in 2021 and expects to launch in the U.S. market an advertising-supported (AVOD) version of HBO Max in June.

This year, the wireless company is planning to increase its fiber footprint by an extra 3 million customer locations across more than 90 metro areas.

Following this, AT&T shares, which slumped around 26% in 2020, rose over 4% to $30.84 on Friday.

Analyst Comments

“While revenues are expected to double over 5 years, profitability will be a focus with dilution peaking in 2022 and breakeven targeted by 2025. AT&T also committed to deploying their new C-Band spectrum starting later this year with 2021 gross capex (and overall guidance) reiterated at $21bn, and called out $6-8bn in capex over 2022-24, at this point it’s not clear whether this is incremental to the current run rate (as at Verizon). AT&T also committed to building past another 3m fiber locations this year,” said Simon Flannery, equity analyst at Morgan Stanley.

“AT&T’s new leverage target is 2.5x or lower by 2024, down from an estimated 3.0x at the end of 2021. We will be looking for more color around free cash flow generation and dividend payout over the next several years, particularly with the impact of the DTV transaction which is set to close in 2H21. This deal should improve top-line trends by 100bp and margins by 300bp although the unit generated some $4bn in free cash flow annually. The company did not provide longer-term revenue or EBITDA growth targets in the release, but we may get more color during the event.”

AT&T Stock Price Forecast

Eleven analysts who offered stock ratings for AT&T in the last three months forecast the average price in 12 months of $31.88 with a high forecast of $38.00 and a low forecast of $24.00.

The average price target represents a 4.70% increase from the last price of $30.45. Of those eleven analysts, four rated “Buy”, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $34 with a high of $46 under a bull scenario and $26 under the worst-case scenario. The firm gave an “Equal-weight” rating on the wireless company’s stock.

“Valuations near multi-year lows already reflect company and industry concerns. Return to wireless service revenue growth with Firstnet and nationwide 5G rollout in 1H20. Potential industry consolidation provides upside opportunities. A dividend payout ratio in the 60s is sustainable in the medium term, buybacks possible as deleveraging continues,” said Morgan Stanley’s Flannery.

Several other analysts have also updated their stock outlook. Scotiabank raised the target price to $28 from $27.5. Deutsche Bank lowered the price target to $31 from $36. Independent Research increased the target price to $29.00 from $27.00 and gave a hold rating. Citigroup cut the price target to $34 from $36. JP Morgan lowered the target price to $32 from $34.

Check out FX Empire’s earnings calendar

Roku Streams Higher After HBO Agreement

Roku, Inc. (ROKU) shares gained 4.37% in extended-hours trade Wednesday after the $41.36 billion digital media company announced it had reached an agreement with WarnerMedia to stream HBO Max content across its devices.

While Roku and WarnerMedia – a subsidiary of communications giant AT&T Inc. (T) – did not disclose specific details of the arrangement, both sides said that they were pleased to hash out a deal that had been on the table since May. The company hopes that the distribution of premium content on its platform will bolster its 46 million-strong active subscriber base and capture market share from Netflix, Walt Disney’s Disney+, and Comcast’s Peacock.

“We believe that all entertainment will be streamed, and we are thrilled to partner with HBO Max to bring their incredible library of iconic entertainment brands and blockbuster slate of direct to streaming theatrical releases to the Roku households with more than 100 million people that have made Roku the No. 1 TV streaming platform in America,” the company’s platform business manager Scott Rosenberg said, per Business Wire.

As of Dec. 17, 2020, Roku stock has surged 143.33% year to date (YTD), gaining around 40% in the past month alone. Like many streaming stocks, the company continues to benefit from people spending more time at home during the pandemic watching the latest blockbuster movies and hit television shows.

Wall Street View

Earlier this month, Citi’s Jason Bazinet bumped the investment bank’s price target on the stock to $375 from $220 while maintaining his ‘Buy’ recommendation. The analyst sees distribution agreements, such as the HBO Max deal, and expansion into international markets as a catalyst for further growth. Moreover, Bazinet places an enterprise value per active Roku account at $619, based on platform margins. Most other brokerages on the Street also have a bullish outlook on the stock. It receives 16 ‘Buy’ ratings, 9 ‘Hold’ rating, 1 ‘Underweight’ rating, and 1 ‘Sell’ rating.

Although several sell-side analysts had factored in an HBO Max carriage agreement, the stock may attract additional upgrades in the coming weeks due to the deal’s timing ahead of highly anticipated content like “Wonder Woman 1984,” which debuts on HBO Max and theaters Christmas Day.

Technical Outlook and Trading Tactics

After bouncing from support at $196 in early November, Roku shares have trended sharply higher. Although the stock is susceptible to a short-term correction, active traders should focus on playing upside momentum, remembering the old Wall Street adage – “the trend is your friend.” To deploy this strategy, consider using a fast period moving average, such as the 15-day SMA, as a trailing stop to let profits run. Simply exit the trade when the price closes below the indicator.

For a look at today’s earnings schedule, check out our earnings calendar.

3 Stocks for Investors Chasing High Paying Dividends

Interest rates were already near historic lows before the COVID-19 pandemic and look like remaining that way for the foreseeable future as the Federal Reserve encourages more borrowing to stimulate the economy. As an alternative to keeping cash squirreled away in a low-interest saving account or government bond, investors can chase a higher return on their money by purchasing high paying dividend stocks.

Bear in mind, companies can slash or reduce their dividend at any time. For example, the major airline stocks pulled their dividends earlier this year amid the uncertainty surrounding travel during the health crisis. In saying that, let’s take a closer look at the three stocks in the S&P 500 that each offer a dividend of over 7%. Currently, the average stock in the index yields 1.8%.

Exxon Mobil Corporation

With headquarters in Irving, Texas, Exxon Mobil Corporation (XOM) explores for and produces crude oil and natural gas. The global energy giant has increased its annual dividend for 33 consecutive years at an average of 3.53% each year. Investors currently receive a healthy forward dividend yield of 8.29%.

As of Nov. 26, 2020, the stock has a market capitalization of $172.55 billion and trades around 25% higher over the past month. From a chart perspective, a recent breakout above a 10-month downtrend line may trigger a retest of the early June swing high at $55.36.

Altria Group, Inc.

Altria Group, Inc. (MO) manufactures and sells cigarettes, smokeless products, and wine in the United States. Although not everyone’s cup of tea, the cigarette maker issues a smoking hot annual dividend of $3.44 per share, equaling an 8.52% yield. Furthermore, the company’s dividend has increased by an average of 11.75% annually for the past 11 straight years.

Altria shares have a market value of $75 billion and trade up a modest 3.33% over the last month as of Nov. 26, 2020. Technically, the price continues to find resistance from the top trendline of a descending channel that may see a decline to the pattern’s opposing side at $35.75.

AT&T Inc.

AT&T Inc. (T) provides telecommunication, media, and technology services through four segments: Communications, WarnerMedia, Latin America, and Xandr. The $206.58 billion communications titan pays a $2.08 dividend per share, with a yield of 7.17%. Impressively, the 37-year-old Dallas-based company has raised its dividend by an average of 2.04% each year for the past 36 consecutive years.

As of Nov. 26, 2020, AT&T stock has gained 4.21% over the last month, outperforming the telecommunications sector average by about 1%. Chart wise, the shares have consolidated since breaking above a multi-month downtrend line earlier this month. A breakout from this level could spark a rally to the June swing high at $33.24.

For a look at today’s earnings schedule, check out our earnings calendar.

AT&T Likely to Sell its Digital Advertising Unit Xandr; Target Price $25 in Worst-Case

AT&T Inc, an American multinational conglomerate holding company, is in discussions to sell its digital advertising unit Xandr, the Wall Street Journal reported citing people familiar with the matter, sending its shares down over 1% on Tuesday.

“Discussions are at an early stage and may not ultimately result in a sale, which is unlikely to fetch more than the amount AT&T paid for AppNexus in 2018,” the WSJ reported.

AT&T’s consolidated revenues for the second quarter totalled $41.0 billion versus $45.0 billion in the year-ago quarter. The COVID-19 pandemic impacted revenues across all segments.

Xandr revenue climbed more than 15% last year to $2 billion.

“AT&T’s wireless growth opportunities remain impressive with the widespread launch of mobile 5G services in several cities. The inherent growth potential of the streaming services from HBO Max also bodes well,” noted analysts at Zacks Research.

“(But) AT&T continues to struggle in a competitive and saturated U.S. wireless industry, while margin pressures due to promotional offers and discounts are headwinds amid the coronavirus-induced turmoil.”

AT&T shares closed 1.14% lower at $29.47 on Friday, the stock is down about 25% so far this year.

AT&T stock forecast

Twelve analysts forecast the average price in 12 months at $34.00 with a high forecast of $38.00 and a low forecast of $25.00. The average price target represents a 15.37% increase from the last price of $29.47. From those 12 analysts, eight rated “Buy”, two rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $36 with a high of $49 under a bull-case scenario and $26 under the worst-case scenario. Scotiabank lowered their rating to sector underperform from sector perform; cuts target price to $30 from $34.

Other equity analysts also recently updated their stock outlook. AT&T had its price target boosted by Royal Bank of Canada to $25 from $24. They currently have an outperform rating on the technology company’s stock. Zacks Investment Research downgraded shares of AT&T from a hold rating to a sell rating and set a $33.00 price objective. Guggenheim lowered their price objective to $38 from $39 and set a buy rating.

Analyst view

“Valuations near multi-year lows already reflect company and industry concerns. Return to wireless service revenue growth with Firstnet and nationwide 5G rollout in 1H20. Potential industry consolidation provides upside opportunities. A dividend payout ratio in the 60s is sustainable in the medium term, buybacks possible as deleveraging continues,” said Simon Flannery, equity analyst at Morgan Stanley.

“Our valuation reflects 5.75% 2020E dividend yield, which is a +400bps spread above the MS Strategy 4Q20 US 10-year Treasury forecast, slightly wider than the historical 5-year average,” he added.

Upside and Downside risks

Upside: 1) Four to three wireless consolidation. 2) Return to wireless service revenue growth. 3) Improving Entertainment Group trends. 4) Activist Shareholder drives change – highlighted Morgan Stanley.

Downside: 1) Increased wireless competition ends return to service revenue growth. 2) Free cash flow pressured, increasing leverage and dividend sustainability concerns. 3) Recession could pressure business wireline, advertising revenues. 4) OTT dilution and execution risks.