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MarketScreener Homepage  >  Equities  >  Nyse  >  AT&T    T

AT&T

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Sale of Hulu Stake Makes the Streaming Future of AT&T Unclear

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04/22/2019 | 10:34am EST

In retrospect, AT&T (NYSE:T) arguably should have sold its minority stake in Hulu back to its majority owners long ago. With less than 10% equity in what was essentially an experimental competitor to Netflix (NASDAQ:NFLX), Hulu didnt mean enough to owners of AT&T stock to truly matter.

Instead, it waited until its partners had become competitors to pull the trigger, leaving it behind those competitors in the process.

Regardless of the timing, its now happened. AT&T has sold the Time Warner sliver of Hulu back to its majority owner Walt Disney (NYSE:DIS) and larger-minority owner Comcast (NASDAQ:CMCSA), pocketing roughly $1.5 billion for its share.

Its hardly the end of AT&Ts streaming ambitions, though. If anything, its closer to the beginning of a home-grown streaming video platform.

The foreseeable future of that ambition, however, looks like a rocky one.

Going Solo

Take a closer, careful look at the streaming video landscape and youll recognize that partnerships are falling out of favor, and integrated top-down solutions are becoming the preferred means of penetrating the market.

Hulu was, of course, the quintessential partnership in the business, melding content from Disney, Time Warner and Comcasts NBCUniversal. It fared reasonably well too, reaching 25 million subscribers as of the end of last year. Thats still a distant second to Netflixs 139 million paying members, but far better than any rival operating in the same space.

Hulu wasnt built to last, though. Too many cooks, or chiefs, and schools of thought to do the collective any good.

Disneys upcoming official launch of its standalone streaming service Disney+ validates the idea that media and entertainment companies feel theyre better served doing their own thing, though the fact that Netflix and CBS have also bet heavily on the creation of content sold directly to consumers underscores the idea. Indeed, even Time Warners HBO offers a standalone streaming option, and Comcasts NBCUniversal reportedly has one in the works.

By virtue of bowing out of the Hulu consortium not that it had much choice AT&Ts Time Warner has sloughed off a potential confusion of interests and freed the company to focus on its own Netflix competitor.

Its still behind the eight ball, though.

Work to Do Ahead

Its a development thats not exactly surprising to AT&T stock owners.

In March, the organization shook up its management ranks to name former NBC Entertainment chairman Robert Greenblatt as chairman of WarnerMedias entertainment and streaming businesses. The shakeup also included resignations from HBOs head Richard Plepler and Turners president David Levy.

The changes, according to AT&T, facilitate agility and flexibility, which isnt difficult to interpret as a shift toward direct-to-consumer options.

AT&T is already in that business, to be clear, but hardly thriving. Streaming service DirecTV Now actually lost 267,000 customers last quarter, which was the first net subscriber loss the platform has logged since launching in late 2016. A Time Warner-branded service might fare better, by costing less, which can be made possible by limiting its library of content to just the video consumers want from the company.

Thats easier said than done, howver. As Hollywood Reporters critic Tim Goodman pointed out following word that AT&T was exiting its Hulu stake:

Nobody outside of this town and hell, many right inside of it can really tell you what the hell WarnerMedia is or has, which is not a problem that Netflix, Amazon, Hulu or Disney+ currently grapple with. So, congratulations, WarnerMedia, youre only slightly more mysterious than Apple+, which, for better or worse, is trying to be mysterious on purpose.

COMPARE BROKERS

Hes right.

And, thats going to be a major headache for a player thats essentially entering the streaming race already in sixth place.

In the meantime, pulling the company away from strategizing its branding is the sheer demand for more video content than the company currently produces.

They want a lot more content coming out of Warner, said CFRA Research analyst Keith Snyder, adding, Thats going to help them launch the streaming service and go up against Disney. They really need to start generating more content [the] reorganization is aiming at that more than anything.

Its all going to be a lot more work, and complicated, than participation in the Hulu partnership was.

Looking Ahead for AT&T Stock

It remains to be seen how the market will view the companys next steps down this inevitable path, primarily because its not even clear the company itself has looked that far down the streaming video path ahead.

One matter is clear, however. That is, much work remains to be done, and AT&T isnt looking especially well-positioned.

Thats not to suggest AT&T stock is unownable here, or that a Time Warner streaming app cant be competitive. It is to suggest, however, that an awful lot of questions remain regarding exactly how AT&T is going to stand out in an increasingly crowded streaming video industry when most consumers still dont recognize the brand the way they do Netflix, CBS or Disney.

(c) 2019 Muscat Media Group Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

Stocks mentioned in the article
ChangeLast1st jan.
AT&T -0.16% 38.25 Delayed Quote.-2.12%
NETFLIX -0.26% 380.4 Delayed Quote.17.56%
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Financials (USD)
Sales 2020 182 B
EBIT 2020 31 874 M
Net income 2020 19 375 M
Debt 2020 148 B
Yield 2020 5,46%
P/E ratio 2020 14,0x
P/E ratio 2021 12,7x
EV / Sales2020 2,34x
EV / Sales2021 2,30x
Capitalization 278 B
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Mean consensus OUTPERFORM
Number of Analysts 32
Average target price 40,07  $
Last Close Price 38,25  $
Spread / Highest target 25,5%
Spread / Average Target 4,76%
Spread / Lowest Target -47,7%
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Managers
NameTitle
Randall L. Stephenson Chairman & Chief Executive Officer
F. Thaddeus Arroyo CEO-Business Solutions & International
Jennifer van Buskirk Regional President-Northeast
David Christopher President-AT&T Mobility & Entertainment
John T. Stankey President & Chief Operating Officer
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