AT&T (NYSE:T) on Tuesday reiterated its outlook for double digit revenue growth, margin expansion, and more than two million total net adds across all combined customer categories.
More importantly, it guided for free cash flow to top $4.5 billion. This, along with a beaten down stock price and double digit revenue growth illustrates why AT&T is a great investment opportunity right now.
Over the last 12 months, DirecTV generated more than $3 billion in free cash flow, suggesting about $750 million in FCF per quarter. While some quarters have higher FCF than others, DirecTV’s business was rather consistent from quarter-to-quarter due to its subscription based business model.
Meanwhile, AT&T reported $3.5 billion in FCF during the third quarter last year. So, the fact that AT&T is guiding for $4.5 billion in FCF in the third quarter this year is quite impressive, suggesting that those $2.5 billion in expected cost savings over the next few years might already been going into effect.
So considering the overall fundamental outlook, buying the call options of this stock appears to be a good strategy in short to medium term.