Miss the Rally? Buy This Stock
AT&T CEO Randall Stephenson made quite the impression at last week’s Goldman Sachs Communicopia Conference. He sold investors on the company’s prospects, and money managers have been buying the stock ever since. Cramer on Tuesday recommended that viewers do the same.
AT&T is “a screaming buy thanks to the iPhone,” the Mad Money host said, “not to mention the dividend and the strength of its other business.”
Wireless is AT&T’s biggest division, and Apple’s landmark handset is no doubt driving revenues. In fact, the average revenue per user for data was up 26% last quarter, and 108 billion text messages were sent, double the amount year-over-year. The company also netted 1.4 million additional wireless subscribers that quarter, and the CEO predicted even more next time around. Given these numbers, it’s easy to see why Cramer said this business was “on fire.”
But AT&T is more than just the iPhone. The landline division came in flat in the second quarter for the first time in two years. A continued decline would have stunted any gains made by wireless. But now, if the economy turns up, Cramer expected “big numbers.”
There’s also AT&T’s video initiative, the U-Verse. Only this company and Verizon can bring video to three screens – the TV, PC and phone – and demand for the service is growing. Last quarter, 248,000 net subscribers added the U-Verse service, bringing the total to 1.6 million, and about 75% of them are using it as part of a triple or quadruple play, meaning cable, Internet, phone and wireless.
Another good move by AT&T was to reduce capital expenditures. They were down to $7.4 billion in the first half of 2009 from $9.6 billion in the first half of 2008. But the company is still investing heavily in cell-phone towers, which are crucial to unclogging the data traffic that’s frustrated many iPhone users.
Cramer likes AT&T for another reason. He called it “the absolute safest mobile-Internet play” because of the 6.2% dividend yield. The payout is something to which the company is dedicated, calling it their first priority in terms of cash generation. For investors, it offers the chance to enjoy returns from a great secular growth trend while also getting the extra cushion that comes with a dividend.
And after all this, the chartists love the stock, too. AT&T broke through its 200-day moving average, a point of resistance where shareholders sell, and now that trend line is the support, which is where the selling stops and buyers come in aggressively.
What is Cramer’s prediction? This stock’s upward trajectory will continue, and investors should get in before they miss this move as well.
“All aboard AT&T,” he said. “Next stop – $30 a share.”
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