The paper contains a stock analysis for AT&T, Inc. The company common stock is traded on the New York Stock Exchange under the symbol “T”. This report begins with the company’s background overview. Subsequent sections consist of the company’s lifecycle, analysis on return on equity, the projected future growth rate of earning, analysis of required return of return, and lastly intrinsic value using the discount valuation techniques. Conducting these analyses, I will provide a buy or sell recommendation and estimated price target.
AT&T Background Information AT&T, headquartered at Whitacre Tower, Dallas Texas, is one of the leading telecommunication corporations in the current precinct. The company was formed in 1984 under the name Southwestern Bell but the name was later changed through
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It is used by investors to determine if the stock is worth the risk. AT&T has an RRR of 7.17% while its biggest competitor Verizon RRR is 8.56%. AT&T investors would expect to receive a 7.17% from their investment. The CAPM is important because it will be used to calculate the fair price of the stock so that we can determine if the stock is overvalued or undervalued.
Intrinsic Value using Discount Valuation Techniques
Investors look at a company’s intrinsic stock value to determine if buying the stock is worth the money. It also shows if a stock is overvalued or undervalued. On February 1st, 2018, AT&T paid a dividend of $.50 (AT&T, 2018). As illustrated above the required rate of return is 7.17%. The intrinsic stock value of AT&T stock using the Dividend Growth Model is as follows:
AT&T Intrinsic Value: Vo = Do(1+g) k – g
Do = $.50 recently paid dividend on February 1st, 2018
G = 4.16 % Stable growth