There are so many strategic decisions I could pick apart (and have), but I think this one is emblematic of the company’s situation: Last year, AT&T decided that driving away DirecTV and DirecTV Now (now called AT&T TV Now) customers by raising prices and cutting back on channels was the best path to improving profitability. When making a product less appealing to customers is the strategy, that’s a problem. It doesn’t serve consumers, employees or shareholders to operate that way, which is why I’ve written here and here that AT&T should sell off the DirecTV division – especially as AT&T’s own WarnerMedia group gears up to introduce HBO Max next year, an app that will compete with DirecTV services.
AT&T is valued at nearly 8 times forward Ebitda, a 20% premium to its five-year historical average ratio, though it’s a wide discount to Disney and Comcast’s valuations. Cohn and Steinberg figure their suggestions could drive AT&T above $60 a share by the end of 2021, from about $38 currently. I don’t put much stock in such predictions, though it’s clearly caught shareholders’ attention.
Whether AT&T gets to $60, or $50 or $70, is anyone’s guess. But Stephenson does need to rethink his approach – or the board may need to rethink his title.
This article was provided by Bloomberg News.