AT&T stock plunged by over 7% in the premarket session as investors dumped most telecommunications companies after SpaceX announced an agreement to purchase spectrum in the United States. It tumbled to $23, down by 13.3% from its highest point in September this year.
Other top telecommunications stocks have also tumbled. Verizon stock dropped by 5.1%, while T-Mobile fell by over 6.6%. The same trend is happening globally, with Deutsche Telekom, BT Group, and Vodafone falling by over 3%.
AT&T stock is falling amid SpaceX competition fears
AT&T and other top telecom companies are in a steep freefall after SpaceX announced an agreement to purchase a nationwide spectrum portfolio from Gain Management, which specializes in digital infrastructure. In a statement, the company said:
“This prime low-band spectrum addresses one of the key remaining technical gaps that will pave the way for Starlink Mobile to become a major mobile carrier in the US.”
The concern among investors is that SpaceX, through its Starlink service, will become a major competitor to AT&T and other telecom companies. Still, history suggests that such disruption fears are often overstated.
Investors once worried that Amazon would upend retailers like Walmart and Target, and that traditional automakers would overtake Tesla in electric vehicles. Yet Walmart, Target, and Tesla all proved resilient.
Most notably, SpaceX faces some major challenges in urban areas as it will need to deploy towers on the ground. The new spectrum is also quite limited.
Focus now shifts to an upcoming vote by the FCC on a proposal to auction 25 megahertz of “prime spectrum” to support D2D services from satellites to smartphones. The vote will happen on October 29 and will benefit SpaceX and Amazon, which are building these solutions.
AT&T’s business is doing modestly well
The most recent results showed that AT&T’s business held steady in the second quarter. Its revenue rose by 2.3% in the quarter to $31.6 billion, with operating income rising to $7 billion.
The company added over 1 million advanced connectivity customers, which was driven by year-over-year increases in net adds across its fiber, fixed wireless and postpaid phone subscribers.
This growth brought its advanced connectivity services revenue to over $23.5 billion, up by 5.1% YoY. Most notably, its guidance was strong, with its service revenue is expected to grow by low single digits. It returned $4.1 billion to shareholders through dividends and buybacks, and plans to return $45 billion through 2028.
Analysts remain bullish on the stock. Scotiabank analysts have a target of $27.50, while Morgan Stanley, BNP Paribas, TD Cowen, and Argus suggest that it will jump to over $30.
AT&T share price technical analysis
The weekly chart shows that the AT&T share price slipped from a high of $26.64 in September to $23. A closer look shows that it has formed an inverted head-and-shoulders pattern, a common bullish reversal pattern.
The stock has remained slightly below the 23.6% Fibonacci Retracement level. It has moved above the 100-week Exponential Moving Average (EMA). Therefore, it is likely that the stock will bounce back as the SpaceX sell-off fades. Such a move may see it rebound to the key resistance level of $26.65.