AT&T Stock Slips on Mixed Q2

The much-anticipated release of HBO Max subscriber numbers notwithstanding, AT&T stock dipped as much as 2.1% on Thursday, after the telco reported losing nearly 1 million pay TV customers in Q2.

AT&T stock was priced as low as $29.54 per share on Thursday morning, down 2.1% from the day before. AT&T had earlier reported Q2 results, adding that it had lost about 886,000 customers to its DirecTV, AT&T TV and U-verse pay TV services, and lost another 68,000 subscribers to its AT&T TV Now OTT service.

AT&T finished the quarter with 17.7 million pay TV customers.

In a research report, Barclays media analyst Kannan Venkateshwar noted that the sub losses are in line with the overall cord-cutting trend in the industry, but haven’t improved over time even after the company rolled off millions of customers from promotional pricing during the past several quarters. 

Venkateshwar also wrote that yields on pay TV subs fell “quite dramatically” by about 200 basis points in the quarter.

Evercore ISI media analyst Vijay Jayant said in a research note that AT&T’s Q2 results were a “mixed bag.”

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While the initial response to its HBO Max service appeared to be strong -- CEO John Stankey said 4.1 million people activated the streaming service after its May 27 launch -- analysts weren’t particularly impressed. In a research report, MoffettNathanson principal and senior analyst Craig Moffett said the HBO Max service, expected to be the savior of its Turner content business, has had "a rather inauspicious start."

AT&T said it had 36.3 million HBO and HBO Max customers at the end of the quarter, compared to 34.6 million Dec. 31.

Financially, the results were less impressive. Consolidated revenue was down 9% to $41 billion compared to $45 billion in the prior year. Operating income was down by half to $3.5 billion from $7.5 billion in Q2 2019 and consolidated EBITDA (a measure of cash flow) was down 6.2% to $14.1 billion..

AT&T blamed most of the declines on the COVID-19 pandemic, which it said affected all of its business segments. In its Entertainment Group,which includes DirecTV, AT&T TV, AT&T TV Now and U-verse, revenue fell 11.4% to $10.1 billion and cash flow was down 18% to $2.3 billion. At WarnerMedia, revenue fell 22.9% to $6.8 billion and cash flow was down 13% to $2.1 billion.