) is expected to announce its Q2 earnings on July 21st. Over the
last few quarters, we have observed that the growth of new
subscribers additions has declined for AT&T. We expect this
trend to continue this quarter as well given general mobile market
saturation and heightened competition from Verizon (
) and Sprint (
). However, the major factor to look out for in the upcoming
earnings release is whether the loss of Apple's (
) iPhone exclusivity has started to hurt AT&T or not.
Our $38 price estimate for AT&T stock
is about 25% above market price.
Subscriber Additions Slowing
During the last few quarters, AT&T has experienced a slowing
in new subscriber additions. For example, AT&T added 2 million
net subscribers in Q1 compared to 2.8 million net subscribers in Q4
2010. We believe this slowdown will continue and hence don't expect
its market share to make any significant gains in future.
iPhone on Verizon Not a Big Issue
The iPhone 4 was launched on Verizon's network in February 2011.
It was widely believed that Verizon would snatch iPhone subscribers
from AT&T largely because of its superior network
However, AT&T's last quarter results did not show any
signs that iPhone subscribers were defecting away from it. On the
contrary, AT&T saw about 3.6 million iPhone activations
during Q1 2011, out of which about 23% were new customers to
AT&T. Compared to the 2.7 million iPhone activations that
AT&T had in Q1 2010, this was a notable increase.
We don't expect to see mass defections from AT&T's iPhone
subscriber base this quarter either as its $325 early termination
fee continues to be a big deterrent for its customers to switch
carriers. Furthermore, AT&T has started to take steps to
improve its network performance, which was a major complaint among
iPhone subscribers before.
See our complete analysis for AT&T stock