AT&T has crashed as Americans can’t afford to pay their phone bills. Peers Verizon and T-Mobile were also affected by this, which sent their shares lower despite second-quarter results that exceeded expectations.
AT&T’s stock price dropped on Thursday after CEO John Stankey claimed that customers were beginning to put off paying their phone bills. As a result, the cellular provider reduced its forecast for free cash flow this year by $2 billion, according to Bloomberg.
The company’s shares dropped as much as 11 percent in early trade, the biggest decline since 2022, wiping out the stock’s gains for the year.
The pressure on AT&T is already high due to steep discounts on new phones and capital expenditures for network equipment. A weaker consumer adds to this pressure. The company now anticipates free cash flow of $14 billion in 2022, of which $1 billion will be impacted by the “timing of customer collections.”
Peers Verizon and T-Mobile were also affected by the announcement, which sent their shares lower despite second-quarter results that exceeded expectations in terms of profit and wireless subscriber growth.
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“I’m not surprised to hear consumers are paying bills more slowly; they are already struggling with higher food and energy prices,” said Wolfe Research analyst Peter Supino. “I’m not worried so much for AT&T as I am for the broader consumer economy. You wonder if this is the canary in the coal mine.”
And just to remind you, the so-called strong consumer is depleting their savings at a virtually unheard-of rate while using credit cards to pay for their skyrocketing living expenses.
Even if consumers are gradually paying their bills, they are “less timely,” Stankey said, and he anticipates more bad debt and delayed payments to persist.