AT & Flee, Plug Power Flies Free & Musk Mauls Bitcoin … Again
AT & Flee
Heard it from a friend who … heard it from a friend who heard it from another AT&T’s (NYSE: T) been messing around.
They say AT&T’s got a boyfriend. It was up late this weekend … in talks with Discovery (Nasdaq: DISCA). They’re talking about selling media, and it’s bringing me down.
REO Speedwagon? Mr. Great Stuff … you’re not going basic, are you?
Hey, I can’t control the radio station in my head any more than I can control AT&T’s stupid business maneuvers. And let’s face it, while AT&T taking it on the run (baby) looks good on paper, the company could have become so much more!
So, here’s the deal: AT&T is spinning off its media operations in a $43 billion deal with Discovery. AT&T shareholders will get 71% of the new company in stock — which is probably the best thing to happen to T shareholders in years. The deal is also structured as a tax-advantaged Reverse Morris Trust to keep Uncle Sam from taking a massive cut of the proceeds.
The new company includes all of Discovery’s media properties (naturally) and all of AT&T’s WarnerMedia operations, including HBO, Cartoon Network, TBS, TNT and Warner Brothers studio.
The name of the new streaming media giant will be announced later this week.
For Discovery, this deal is a godsend. The purveyor of TLC, History and Animal Planet was just starting to make headway in the highly competitive streaming market, and this influx of content makes it a serious contender with the Netflix’s and Disney+’s of the world.
If you are looking for an up-and-coming streaming provider, Discovery is now well worth a serious look when this spinoff mania dies down.
For AT&T? What can I say? I have no desire to invest in T stock anymore. The thrill is gone. AT&T could have been great. It could have been a contender. Instead, it’s selling WarnerMedia — a company it paid $85 billion for back in 2018 — for about half the price it paid. Buy high and sell low appears to have become AT&T’s schtick as it works to alleviate mountains of debt.
Don’t get me wrong. This deal goes a long way to shoring up AT&T’s financial situation. But that’s about the end of it. All in all, AT&T is selling WarnerMedia because it couldn’t get out of its own way. From multiple confusing services to a market-high subscription price to a spat with Roku … AT&T botched the integration of WarnerMedia from day one.
The real question for AT&T stockholders is: “What now?”
I’ll tell you what now. Minus HBO Max and the WarnerMedia unit, AT&T is just another wireless provider … and a poor one at that. The company is quickly losing ground in the 5G wireless market, with both Verizon and T-Mobile taking full advantage of AT&T’s massive debt and inability to leverage its media holdings.
And while the spinoff to Discovery will ease some of AT&T’s immediate debt concerns, the company will still have to spend to catch up to Verizon and T-Mobile. And that means more debt.
Given AT&T’s poor handling of WarnerMedia, this $43 billion spinoff is honestly the best choice for the company — especially since AT&T has shown it has no idea how to operate a streaming service profitably.
AT&T is once again just a wireless provider. And in that light, investors have much better options for growth without massive overhanging debt.
Editor’s Note: The Safe Way To Trade Crypto
Cryptocurrencies are on fire, and investors are cashing in fast.
And Paul Mampilly has discovered a way to play the crypto boom without the volatility of cryptos. It’s a little-known tech company that makes an obscure type of software that cryptocurrencies depend on to work.
This stock is at the forefront of a little-known tech niche. And Paul expects this tiny niche to grow more than 10 times over in just the next four years. He has the full details for you.
The Good: Plug Unplugged
Did y’all enjoy the new Great Stuff weekend edition? In case you missed it, I answered the question: “What’s the deal with Plug Power?” I took a deep dive into the company’s customers, prospects and the potential impact of its recent financial restatement.
In an odd twist of fate, Plug Power (Nasdaq: PLUG) released its restated earnings before I could update this weekend’s article. Oops. Such is the nature of Wall Street. Still, I stand by my bullish outlook for PLUG.
So, what changed with the company’s restatement? Not much, actually. 2020 revenue was increased by $7.2 million to negative $93.2 million. 2019 revenue was reduced by $300,000 and 2018 revenue by $400,000.
Furthermore, 2020 earnings declined by $0.10 per share, 2019 losses remained the same and 2018 losses widened by $0.03 per share.
Plug Power now has a clean financial slate with which to move forward. Or, as Evercore’s James West put it: the “shroud of uncertainty hanging over PLUG shares” is now gone.
As I said this weekend, PLUG is the No. 1 hydrogen fuel cell stock to own. I still maintain that hydrogen power is the future of green energy, and Plug Power is at the forefront of that movement. If you haven’t bought in already, now is the time.
The Bad: Musk Sparks Mutiny
Bitcoin (BTC) crashed more than 20% this weekend because Elon Musk can’t keep his mouth shut. That’s it. That’s the reason.
On Sunday, a Mr. Whale said: “Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their Bitcoin holdings.”
To which Musk replied: “Indeed.”
That one-word tweet was all it took for the crypto market to embark on a bitcoin selling spree:
Has Tesla (Nasdaq: TSLA) already sold its Bitcoin holdings?
Will it sell bitcoin soon?
If Tesla is selling, shouldn’t we?
Speculation was rampant. It was so bad that Musk was forced to issue clarification this morning, tweeting out: “To clarify speculation, Tesla has not sold any Bitcoin.”
But the damage was already done. Musk’s clarification did little to ease crypto traders’ minds, and bitcoin fell another 8% today. And it wasn’t the first time Musk has upset the crypto market. In fact, he did it roughly one week ago today with Dogecoin (DOGE).
Long-term bitcoin “hodlers” know to just ignore Musk. The cryptocurrency’s future is not dependent on him or Tesla. However, after this weekend’s ridiculous sell-off, most bitcoin investors would probably prefer if he just kept his mouth — and tweets — shut.
As my grandmother would say: Elon … this is why we can’t have nice things!
The Ugly: Are You Not Entertained?
This one is a hard one for me, Great Ones. I like AMC Entertainment (NYSE: AMC). I think the company has real rebound potential as the threat of the pandemic fades.
Heck, last week, AMC announced that it had completed the sale of 43 million new shares at an average market price of $9.94 to raise $428 million. In other words, the company’s balance sheet is primed and ready to emerge from the pandemic stronger than before.
But what makes AMC “ugly” … and why I haven’t added the stock to the Great Stuff Picks portfolio … is its meme-stock status.
AMC has surged more than 40% over the past seven trading days. In fact, it’s up nearly 600% since the start of the year. That’s just not natural. The rally defies logic and fundamentals … just like GameStop (NYSE: GME).
If you are playing the meme-stock game and banking massive returns, bully for you. Maybe in about a year or so, AMC will actually report revenue and earnings that justify this insane price surge. But for now, it’s live by the meme, die by the meme.
Right now, there is just too much uncertainty and speculation for me to justify recommending AMC as a serious investment … even though I really want to.
Great Stuff Looks Ahead
That’s enough Monday ranting from me … what stocks are you watching this week? Are any of your own personal picks entering the earnings limelight? Let me know!
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Editor, Great Stuff