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Is AT&T Heading For (Another) Dead Cat Bounce? AT&T stock is not a buy right now. However, if you buy into the theory that the news can't get any worse than holding on to your existing shares may n...

By Chris Markoch

This story originally appeared on MarketBeat contributor/ - MarketBeat

They say cats have nine lives and the same may be true of AT&T (NYSE:T). On more than one occasion in the last 12 months, investors have put some pep in the step of T stock. But nothing has been enough to prevent the downtrend in the trajectory of the stock.

In fact, over the last five years, shareholders have seen AT&T's stock price drop over 34%. Of course, some of that loss was soothed by the company's generous dividend. But even AT&T's dividend darling status is going by the wayside.

While not suspending the dividend, the company has already announced they would be cutting the dividend after it closes its reverse merger deal to spin-off WarnerMedia to Discovery (NASDAQ:DISCA). While this may work out for shareholders, it was a colossal misstep for a company that has had a series of missteps in recent years.

AT&T stock is flat as it heads into earnings and some analysts are suggesting that the company may surprise to the upside. The whisper number has earnings coming in as a slight beat of 80 cents per share as opposed to the 78 cents EPS expected. Revenue is forecast to come in at $42.6 billion which would be a 4% year-over-year increase.

Will Streaming Growth Continue?

A key source of AT&T's revenue is its emergence in the streaming wars. HBO Max is steadily increasing its subscriber base.

Investors will be paying close attention to the company's guidance. Previously, AT&T was forecasting between 67 million and 70 million subscribers by the end of 2021. What will be driving this growth is the company's continued international expansion. The company plans to be in as many as 60 markets globally by year's end.

The Known Is Always Better Than the Unknown

There are many who will disagree with me, but I always believe that the known is better than the unknown. That's because no matter how bad the news is the absence of negative surprises lets you make a plan.

That's what I think about with AT&T. The company tore off a huge band-aid in May and shareholders reacted accordingly. However, institutional ownership has been basically a wash. And I'm noticing that there is growing interest from the "smart money" as earnings approach.

Some of that is because of the revenue growth from HBO Max. And some of it is likely due to anticipated growth in its postpaid phone subscribers. If the company meets analysts' expectations for 1.6 million additional subscribers this year it would be the most net additions in five years.

This isn't a "buy while others are fearful" rah-rah article. AT&T has a lot of trust to rebuild. I'm simply stating an obvious truth. The company, at least on paper, is recognizing that it lost its way. Taking the steps they're taking is not good for shareholders in the short term. But in the long run, who knows?

Trust But Verify

AT&T stock is not a buy right now. However, if you're a current shareholder it's probably not a sell either. The reason I say this is taxes. Specifically, selling your T shares will trigger a taxable event. Whereas gaining shares in the spin-off will not.

Of course, some investors may want to head for the exit doors. But remember, the dividend cut doesn't take place for another year. So it may be worth it to hold onto your AT&T stock until then if for no other reason than to collect that.

The only caveat to that is if you feel the floor is about to fall in. Because of the company's likely revenue gains from its streaming business, that seems less likely.

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