At this point, I've maxed out my T allocation with a bit overweight at 6.16% of Portfolio Value. I normally like to keep allocation of blue chip companies around 5%. So, T has been an exception for me.
I thought, it might be helpful for my readers who may still be contemplating on whether to buy or wait on purchasing T, if I share updated valuation charts:
|T downside price estimate|
This is a 10 year chart with 8 years of historic and 2 years of forward/estimated data. The pink line represents bottom historical valuation or multiple, while the orange line represents fair-value multiple. The black line represents the stock price movement, while the green area represents earnings.
The pink line or the bottom price support is based on the lowest valuation (P/E) reached in 2010. In the past eight years, T has never traded at such a low valuation or P/E multiple.
At yesterday's stock price, T is still about 4.3% above the 2010 valuation (bottom support line) with the current yield of nearly 6%. This is an incredible deal on a blue chip and iconic company; however, high yield always comes with some risk.
Even though, most of the bad news from the earnings report is already baked into the price, there is ongoing risk or pressure due to TWX merger. I believe the merger will go through, but not without some comprise from T with regards to what DOJ wants.
I still feel that at the current price, there is way more upside (~32%) than the downside (~4.3%).
|T upside potential|
Thanks for reading and hope this helps a bit.
Disclosure: I am long T and VZ.
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