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Sept. 14, 2019, 10:01 a.m. EDT

How an underperforming AT&T could eventually outperform Apple and Amazon

AT&T may be a lumbering giant, but in tough times investors may flock to the stock

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By Nigam Arora


Getty Images
AT&T CEO Randall Stephenson

Apple and Amazon shares have been great performers for years, while good, old AT&T hasn’t done much of anything.

But under one scenario, AT&T’s /zigman2/quotes/203165245/composite T +1.75% stock has the potential to outperform Apple /zigman2/quotes/202934861/composite AAPL +0.48% and Amazon /zigman2/quotes/210331248/composite AMZN -1.68% Let’s explore this issue with the help of a chart.

Please click here for an annotated chart of AT&T.

Note the following:

• It’s a monthly chart. In this case the monthly chart is appropriate as the objective is a long-term position.

• The chart shows that the stock of AT&T jumped on activist investor Elliott Management taking a $3.2 billion stake in AT&T.

• Elliott Management says AT&T stock could be worth at least $60 per share by the end of 2021.

• Coincidently, the chart also shows the long-term target of $60.

• Elliott’s $60 target is based on the sale of non-core assets, an increase in strategic focus, an improvement in operational efficiency, better capital allocation and better governance.

• Compare AT&T’s stock to S&P 500 ETF /zigman2/quotes/209901640/composite SPY -0.44% on a chart and you will readily see that AT&T has been underperforming. Underperforming stocks often revert to the mean.

• The chart shows the first target is around $44. In due course, we will provide to our subscribers more precise target zones.

• The chart shows AT&T’s stock has traced higher lows.

• Relative strength index (RSI) on the chart shows that the stock is overbought and may pull back.

• Although the Elliott news caused an increase in volume, the stock closed near the low of the day when the news was released. This is a negative. This indicates a pullback may occur in the near future.

• Overall, the chart shows that volume is not high. This also indicates that a pullback may occur in the near future.

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

/zigman2/quotes/203165245/composite
US : U.S.: NYSE
$ 38.47
+0.66 +1.75%
Volume: 37.67M
Oct. 18, 2019 6:30p
P/E Ratio
16.16
Dividend Yield
5.30%
Market Cap
$281.10 billion
Rev. per Employee
$637,332
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/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 236.41
+1.13 +0.48%
Volume: 24.38M
Oct. 18, 2019 4:00p
P/E Ratio
20.15
Dividend Yield
1.30%
Market Cap
$1068.38 billion
Rev. per Employee
$1.98M
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 1,757.51
-29.97 -1.68%
Volume: 3.37M
Oct. 18, 2019 4:00p
P/E Ratio
72.92
Dividend Yield
N/A
Market Cap
$869.36 billion
Rev. per Employee
$359,671
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/zigman2/quotes/209901640/composite
US : U.S.: NYSE Arca
$ 297.97
-1.31 -0.44%
Volume: 64.34M
Oct. 18, 2019 8:00p
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