The worst may finally be over for AT&T (NYSE:T) stock. The company had a terrible 2021 and a rather dire decade on the whole if we’re being honest.
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In December 2011, T stock traded around $29 per share. 10 years later, shares are now around the $26 mark. Sure, there have been dividends along the way, but AT&T shareholders missed out on of the greatest bull markets in American history.
AT&T may finally be reaching an inflection point. The company is set to unwind its failed Time Warner acquisition in 2022. In doing so, it could allow the business to get back to basics and start generating shareholder value once again.
While T stock has done nothing to earn shareholder trust in recent years, for people looking to buy tax loss cast-offs heading into 2022, there is starting to be a plausible bull scenario here.
A Closer Look at T Stock
For the better part of the past five years, tech stocks have dominated the market. That was especially true immediately following the onset of the pandemic.
Funds like Cathie Wood’s Ark Innovation (NYSEARCA:ARKK) had the top returns, and the idea of buying a stodgy dividend stock like AT&T was out of the question.
Since mid-2021, however, the tides have started to turn. Funds like ARKK have started to underperform dramatically, and once fashionable sectors such as electric vehicles (EVs) and special purpose acquisition companies (SPACs) have lost their appeal.
Meanwhile, left-for-dead industries such as energy and retail roared back to life.
AT&T missed out on that reversal since it was busy with its dividend cut and corporate restructuring in 2021, but 2022 might finally mark the inflection point for T stock.
For one thing, telecom as a group struggled in 2021 with Verizon (NYSE:VZ) also routinely falling to new lows.
A part of that was due to the capital expenditure cycle. Firms such as Verizon and AT&T have spent heavily on rolling out new networking gear for the 5G cycle.
There have been some delays with making this go live. The Transportation Department has concerns about 5G potentially affecting airline safety. However, it appears that there is progress on that front and the new 5G deployments may launch later this month.
Meanwhile, as cash flows should rise from core telephony operations, that could put Verizon and AT&T in a good place as far as market sentiment goes. It seems that investors are starting to demand actual profits and cash flows from investments again instead of relying primarily on expectations of future growth.
If current profitability, cash flows and dividends are what investors are looking for in 2022, telecom could be a great hunting ground. Verizon is trading at fewer than 10 times earnings for a solid steady business with a more than generous dividend yield.
AT&T stock is even cheaper at less than 8x forward earnings. There’s more moving parts with the latter ahead of the media business spin-off and the uncertainty around AT&T’s short-term earnings trajectory. However, analysts see AT&T returning to earnings growth in 2023 while starting from an already rock bottom valuation.
AT&T Stock Verdict
As much as AT&T’s valuation appeals to bargain hunters, there are still problems here. I personally wouldn’t invest a dime of my own capital into AT&T shares until the management team is replaced.
Given AT&T’s unbelievably bad track record with mergers and acquisitions, it’s simply too speculative for my taste to entrust them with my hard-earned funds.
That said, you can make a reasonable argument that AT&T will play defense for a while. After failing so spectacularly with DirecTV, AT&T Mexico, and Time Warner among other ventures, perhaps management has learned its lesson and will stick to its core competencies.
If so, T stock can rally in 2022. The core telephony assets are quite strong, and the valuation is more than fair at current prices.
Verizon is probably the safer choice among the big telecom players. It has a more reliable capital allocation track record and also offers a compelling dividend yield. That said, for the true bargain hunters out there that don’t mind a roll of the dice, T stock finally has more positives than negatives going forward.
On the date of publication, Ian Bezek 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.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a sizable New York City-based hedge fund. You can reach him on Twitter at @irbezek.
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