Why AT&T Stock Plunged on Friday

Shares of AT&T (NYSE:T) fell 8% on Friday after a new report stoked investors’ fears of a potentially disruptive encroachment by Space Exploration Technologies (NASDAQ:SPCX) into the lucrative U.S. wireless market.

Stressed trader watches a falling stock market chart on a laptop in an office.

Image source: Getty Images.

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A worrisome new threat

SpaceX is in talks to obtain access to at least 80,000 cell sites across the U.S., according to a report by Bloomberg. The telecommunications infrastructure would serve a crucial role in SpaceX CEO Elon Musk’s plan to create a formidable rival to AT&T, Verizon, and T-Mobile.

During SpaceX’s third-quarter earnings call on Oct. 20, chief operating officer Gwynne Shotwell said Starlink Mobile’s monthly users jumped 37% to over 22 million. The satellite-to-cellular network connects ordinary smartphones to SpaceX’s low-Earth orbit constellation.

The space technology titan recently acquired a nationwide portfolio of low-band spectrum licenses that it says “will pave the way for Starlink Mobile to become a major mobile carrier in the U.S.”

“We will be building out our terrestrial network such that there is broad-based connectivity anywhere that SpaceX and Starlink are allowed to operate,” Musk said.

AT&T won’t go down without a fight

SpaceX isn’t an adversary to be taken lightly. However, building another nationwide wireless carrier won’t be cheap, with costs likely to reach tens of billions of dollars. It’s also likely to take time — and perhaps longer than today’s sell-off in AT&T’s share price would suggest.

In the meantime, AT&T continues to win new customers. The telecom leader added 379,000 postpaid phone subscribers in the third quarter, along with 442,000 fiber and 327,000 fixed wireless customers.

AT&T’s revenue, in turn, rose 5% to $32.3 billion, and management lifted its full-year adjusted earnings guidance to $2.40 per share. Following today’s declines, AT&T’s stock can be had for less than 9 times its projected 2026 profits.

Moreover, the wireless leader expects its cash profits to grow — not fall — in the coming years. AT&T sees its free cash flow rising to over $21 billion in 2028, up from $18 billion this year.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.

Why AT&T Stock Plunged on Friday was originally published by The Motley Fool

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