Shares of AT&T (NYSE:T) stock are in recovery mode today after the stock took a big hit yesterday on news of an AT&T outage, which affected as many as 70,000 of the company’s customers. Earlier this morning, T stock moved to within 20 cents of the stock’s close on Wednesday before paring some of these gains this afternoon.
Today’s move higher appears to be due in part to clarification from AT&T about the cause of the outage. The company announced the results of its initial investigation into this downtime, suggesting that an incorrect internal process tied to a software update is likely to have led to the outage.
With this commentary, speculation of a cyberattack has now been pushed aside, and investors are free to focus on how AT&T will continue to perform in the coming quarters. A cyberattack or related major incident could certainly be a big downside for this major carrier, and with that potential headwind out of the way, certain investors feel free to commence buying this high-yielding dividend stock.
Let’s dive into what to make of this recent outage and where AT&T could be headed from here.
AT&T Outage Not a Cyberattack
Investors certainly have reason to shift their stance on AT&T today following this internal investigation. Any sort of downtime is likely to be detrimental to the company and its reputation as a stable mobile phone service provider. However, this outage is also not likely to be a protracted event, with the company able to learn from its findings and move on.
Investors who bought yesterday’s dip may have also been able to secure a dividend yield of nearly 7%. That’s incredible, and given AT&T’s value as a bond proxy, it’s hard to argue with the sort of relative value investors are getting at current levels. At less than nine times trailing earnings with a dividend yield above 6.5%, there’s a lot to like about how cheap AT&T’s stock price is relative to its peers.
Of course, many would argue this legacy telecom company is cheap for a reason. There’s likely something to that thesis. AT&T is a company with a lot of debt and, as we’ve seen, a number of massive markets to service nationwide. This outage certainly highlights some of the risks of owning T stock, even at these depressed levels.
But I have to say, after yesterday’s dip, I was inclined to consider buying the stock. I wish I did.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
