In this article, I have evaluated prominent telecom stocks AT&T Inc. (T) and ATN International, Inc. (ATNI) to determine which stock to buy, hold, or sell. After thoroughly evaluating these stocks, I think waiting for a better entry point for both stocks could be ideal for the reasons discussed in this article.
Rising spending on deploying 5G infrastructures due to the shift in customer inclination toward next-generation technologies and smartphone devices is one of the key factors driving the telecom industry.
Also, an increasing number of mobile subscribers, soaring demand for high-speed data connectivity, and the growing demand for value-added managed services are the other potential factors fuelling the market growth.
The global telecom services market is expected to expand at a CAGR of 6.2% until 2030.
Moreover, T has declined marginally intra-day compared to ATNI’s marginal gain. However, T gained 7.4% over the past month compared to ATNI’s 7.9% decline.
Here are the reasons why I think it could be wise to wait for a better entry point for both the stocks:
Recent Developments
On July 6, 2023, T and Boldyn Networks, a leading infrastructure provider in the United States and globally, announced they were bringing significant coverage expansion for the San Francisco Municipal Transportation Agency (SFMTA). Through this partnership, millions of passengers will be getting improved wireless connectivity across tunnels, stations, rail cars, and surrounding areas.
Conversely, on July 17, 2023, ATNI announced the completion of a $300 million debt financing that includes extending and expanding its senior secured credit facilities, consisting of a five-year $170 million revolving line of credit and a six-year $130 million term loan.
Recent Financial Results
T’s revenues increased marginally year-over-year to $29.90 billion in the fiscal second quarter that ended June 30, 2023. Its adjusted operating income increased 8.5% year-over-year to $6.40 billion. Yet, its adjusted EPS decreased 3.1% year-over-year to $0.63.
On the contrary, for the fiscal second quarter that ended June 30, 2023, ATNI’s total revenue increased 3.9% year-over-year to $186.44 million. Its operating income grew 41.7% from the year-ago quarter to $2.44 million.
However, its operating expenses increased 3.5% year-over-year to $184 million. Its net loss per weighted average share attributable to ATNI amounted to $0.03.
Past And Expected Financial Performance
T’s revenue has decreased at a CAGR of 5.2% over the past five years. Its revenue is expected to increase marginally this year and in the third quarter ending September 2023. Its EPS is expected to decline 5.5% this year, 8.7% in the current quarter ending September 2023, and 5.3% in the next quarter ending December 2023.
Conversely, over the past five years, ATNI’s revenue grew at a 10.6% CAGR. Analysts expect ATNI’s revenue to increase by 4.4% this year and 4.7% in the third quarter ending September 2023. Its EPS is expected to gain 36.8% this year, 42.3% in the current quarter ending September 2023, and 84.6% in the next quarter ending December 2023.
Valuation
T’s forward P/S multiple of 0.89 is higher than ATNI’s 0.69. T’s forward EV/Sales multiple of 2.33x is also higher than ATNI’s 1.68x.
Thus, ATNI is more affordable.
Profitability
T's trailing-12-month gross profit margin of 58.89% is higher than ATNI’s 55.68%. In addition, T’s trailing-12-month EBIT margin of 23.02% is higher than ATNI’s 2.41%.
Thus, T is more profitable.
POWR Ratings
Both the stocks have an overall rating of C, which equates to a Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. T has a C grade for Quality, its trailing-12-month asset turnover ratio of 0.29x is 39.8% lower than the industry average of 0.48x. However, its trailing-12-month gross margin of 58.89% is 19.3% higher than the 49.37% industry average.
Similarly, ATNI has a C grade in Quality. Its trailing-12-month asset turnover ratio of 0.45x is 7% lower than the industry average of 0.48x. However, its trailing-12-month gross margin of 55.68% is 12.8% higher than the 49.37% industry average.
Among the 18 stocks in the Telecom - Domestic industry, T is ranked #8, while ATNI is ranked #4.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Momentum, Stability, Sentiment, and Value. Get all T ratings here. Click here to view ATNI ratings.
The Winner
Rapid digital transformation worldwide amid the growing adoption of cutting-edge technologies among individuals and enterprises, and growing demand for value-added managed services are driving the telecom market growth. Industry players such as T and ATNI should benefit from these industry tailwinds.
However, considering T's elevated valuation, ATNI's low profitability, and their mixed performance in the most recent quarter, it could be wise to wait for a better entry point in both the stocks.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Telecom – Domestic industry here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
ATNI shares were trading at $34.55 per share on Tuesday morning, up $0.23 (+0.67%). Year-to-date, ATNI has declined -22.90%, versus a 16.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
The post AT&T Inc. (T) vs. ATN International (ATNI): Buy, Hold or Sell? appeared first on StockNews.com