KEY POINTS
- AT&T expects to produce sustainable growth following its appearance on DirectTV and Warner Bros. Discovery.
- The Cisco Hardware business is facing immediate challenges, but expects its growth to stabilize as it grows its subscription business.
Which stock blue chip tech is the best revenue stream game?
AT&T (T 0.28%) and Cisco (CSCO 0.02%) are generally considered to be flawless revenue replacements for growth games. AT&T paid dividends 5.4% dividends for next year's Warner Bros. Discovery (WBD 2.04%), while Cisco paid 3.5%.
Should investors buy any of these blue chip tech stocks as games to protect against inflation, rising prices, and other major storms? Let’s re-evaluate their growth rates, challenges, and ratings to find out.
Will the "new" AT&T "go better than the original?
AT&T has made a bad profit since 2015 for one simple reason: It does not take care of its wireless business while growing its pay-TV and media businesses through debt-generating acquisitions. The expansion added DirecTV, Time Warner, and other small companies to the AT&T ecosystem. But in spite of all that, AT&T has continued to lose subscriber TV subscriptions to Netflix and other video streaming platforms. In response, the social media giant tried to expand its video streaming services, but those efforts were costly and confusing to consumers, and ended the supply of the legacy At&T TV. As AT&T tries to fix its dirty media business, it fell sharply behind rivals Verizon and T-Mobile in the 5G market.
But last year, AT&T dropped DirecTV and began splitting up its small media assets and retail outlets. Last month, the company did the same with its Time Warner assets and merged with Discovery to create Warner Bros. Discovery. AT&T says the release will improve its business, reduce its debt, and enable it to focus on the long-term growth of its main telecom business.
AT&T expects revenue to rise by a single lower digit by 2022 and 2023 with its adjusted EPS (per share per share) to increase by 2% by 2022 and to 7% by next year. By early 2021, AT&T's total debt to EBITDA (pre-interest rates, taxes, depreciation, and amortization) averaged 3.1. Managers say this is the $ 23 billion made in C-Band spectrum payments, expect this rate to be "a high level of rate," and predict plans for a double discount at 2.5 by the end of 2023. It also aims to generate $ 20 billion in free cash flow by 2023 and spend about 40% of that amount on its shares.
AT&T's long-term forecast is disappointing, but it shows that the company is on track to become a stable communications company again. If that strategy pays, then its stock could become a major buyer, now trading eight forward profits.
Cisco is facing very close storms
Cisco is the largest manufacturer in the world of network switching and dynamics, but those two markets are the best-selling. It has been growing beyond those asset products with new wireless devices, cybersecurity services, and applications, but $ 49.8 billion from the 2021 financial year (ending July 2021) represents just an estimated 1% annual increase.
Last September, however, Cisco made some big promises. It has announced that revenue and adjusted EPS will grow both in the CAGR of 5% to 7% between 2021 and 2025. market (TAM) with new products and services.
Unfortunately, Cisco growth has fallen short of those targets during the 2022 financial year as it faces supply chain challenges, the new closure of COVID-19 in China, and the Russo-Ukrainian war. Cisco emphasizes that the market demand for its products is "still strong," but it also does not know when these storms will end.
As a result, Cisco now expects revenue to increase by 2% to only 3% for the full year and for its adjusted EPS to grow by 2.5% to 5%. That decline is not a disaster, but it may force it to go back to its expected growth targets for the 2025 financial year.
On the bright side, Cisco has spent only 46% of its free money on dividend payments over the past 12 months, giving it plenty of room for future travel. In addition, its low price-to-11 ratio still has to reduce its current potential in this challenging market.
Best Buy: AT&T
Both of these blue chip stocks are safe games, but I believe AT&T will always be a better buyer than Cisco for three reasons: Its stock is cheaper, its yield is higher, and it faces supply chain and major storms. Cisco's prospects could flourish after this difficult time, but its stock could remain in the penalty box until it fixes its 2025 expectations.
