Everything You Should Know About HBO Stock In 2021
HBO has never been a stand-alone stock. Home Box Office began as Time Warner's premium cable business and later joined the rest of the company in a merger with telecom behemoth AT&T.
As a result, HBO is part of a bigger media conglomerate that is nestled beneath the wing of an even greater communications conglomerate. To further complicate matters, AT & T now owns DIRECTV, a satellite television provider.
So, although there's no way to purchase HBO stock in any meaningful manner, the premium cable network does make a quantifiable, substantial, and publicly disclosed contribution to AT&T's financial performance.
HBO revenues increased 10.6% year over year in this week's third-quarter report, while the whole WarnerMedia sector saw 4.9 percent lower revenues and AT&T's overall sales dropped by 2.4 percent.
HBO is a remarkable performer in AT&T's generally failing portfolio of varied businesses, which is housed inside another lousy company previously known as Time Warner. The HBO branch of AT&T's WarnerMedia business brought in $1.82 billion in revenue in the third quarter, up 11 percent year over year.
COPYRIGHT_WI: Published on https://washingtonindependent.com/hbo-stock/ by Alberto Thompson on 2021-11-17T05:27:28.981Z
The upcoming launch of HBO Max, a streaming media platform, could increase HBO's long-term growth potential, but it will reduce AT&T's bottom-line profits by around 5% in 2020. Launching a brand-new entertainment business isn't inexpensive. HBO would be a decent investment if it could be broken out as a stand-alone ticker.
Because there is no market-vetted value to speak of, it's difficult to say, although fast-growing media companies with a strong internet focus tend to do well in today's stock market.
That's a more difficult proposition when it comes to AT&T as a whole. AT&T's stock is a good choice for income investors seeking high dividend yields and nothing else. Even then, I could put you in the direction of some better income investments at a moment's notice.
Content reigns supreme in today's technology-driven society, making streaming stocks a potentially profitable investment. The one with the most substance and diversity has the best chance of winning the race, but who comes in first varies all the time depending on who you ask and how you count it. In the streaming video business, there is a lot of competition.
Members have little incentive to stay members, and the cost of switching to a competing service is so low that many individuals subscribe to several streaming services and/or cycle between them on a monthly or as-needed basis. Piracy is always a concern, and distribution methods are evolving. There are also worries about rules and licenses.
A streaming video service must sign a contract with the content creator in order to broadcast particular material, which typically lasts many years. If the number of subscribers increases or decreases, the expenses remain the same and these costs may be substantial for high-profile material. On top of that, log-ins are often shared.
The essential information is hidden deep inside AT&T's trending schedule, which it publishes in connection with its quarterly updates. As the title suggests, this update covers most of the company's main financial statistics and consumer KPIs, including HBO and HBO Max.
The chart below shows how the HBO brand's client mix has changed over the last six quarters, compared to the company's average revenue per user (ARPU) received during each quarter. Take a peek around.
First, don't be too taken aback by the unexpected influx of HBO Max Wholesale customers in the second quarter of last year. First, don't be too taken aback by the unexpected influx of HBO Max Wholesale customers in the second quarter of last year.
Consumers who subscribe to HBO via their cable television provider or who are qualified for HBO Max through another AT&T-provided service make up the majority of this group. Not everyone in the audience was watching HBO Max.
Given the low number of "activations" observed in the first couple of quarters of HBO Max's existence of just over 8.6 million at the end of last year's third quarter, it's safe to assume that the majority of this audience wasn't viewing HBO Max.
Second, don't get too worked up about HBO subscribers suddenly disappearing in the fourth quarter of last year. Almost all HBO cable subscribers, as well as a number of consumers viewing HBO on a streaming device, were reclassified as HBO Max Wholesale or HBO Max Retail subscribers at that time.
The majority of them were still not watching HBO Max. By the end of 2020, fewer than 17.2 million people had actually activated HBO Max, which was less than half of the number of people who were eligible for free access to the on-demand platform.
HBO Commercial, the third (and possibly least significant) segment, represents large clients such as hotels that provide premium content to their visitors in their rooms. As a result, the number does not vary much from one quarter to the next. These are a group of clients who can be counted on.
This is the most interesting portion of the narrative told by the graphic. That is, during the first quarter, the HBO Max Retail subscriber count increased faster than any other sector, and these people are paying for the service.
HBO Max has 8.6 million active customers at the end of the third quarter, according to AT&T CEO John Stankey, increasing the total number of HBO and HBO Max subscribers in the United States to 38 million. This is more than the company's goal of 37 million by the end of 2020 and 57 million worldwide. Its 7.3 percent dividend yield outperforms the competition by a wide margin.
It also continues to expand its 5G wireless network, with connectivity to 5G currently available to consumers and companies in 327 cities throughout the United States. Despite these favorable developments, shares continue to underperform their rivals and the wider markets. Concerns about the company's heavily leveraged financial sheet, dividend payment, and high investment expenses pose significant challenges.
Adding fresh material to HBO Max will also need a significant amount of money. Streaming is all the rage in 2020, and HBO Max is a long-term tailwind for T Stock.
Lockdown restrictions imposed in response to the new coronavirus epidemic resulted in a massive increase in TV viewing and internet streaming. AT&T's HBO Max joined the fight during the first few months of the epidemic and has done very well.
Following the high-profile purchases of DirecTV and Time Warner, AT&T faced a lot of criticism. The epidemic has put a lot of strain on the industry, with cord-cutters robbing TV customers and movie theater closures affecting studio profits. HBO Max is the answer to these issues.
Total HBO Max customers in the United States were 38 million at the end of the third quarter, with 57 million globally. However, it's worth noting that there have been 12.7 million HBO Max activations so far.
That implies that about half of the current HBO customers who might receive HBO Max for free haven't yet seen it and maybe unaware that it's available. On a more positive note, HBO Max has finally landed on the Roku platform.
One of HBO Max's early flaws was its lack of availability on the most popular streaming TV services. Subscribers will continue to increase at a steady rate now that Roku has finally taken up HBO Max. Other streaming services, however, are increasing their prices.
Netflix increased its regular monthly fee from $13 to $14 in November. Disney's Disney plus Hulu and ESPN+ package will also see a $1 increase in price, from $13 to $14 per month. At $14.99 a month, HBO Max is still very pricey.
The platform, however, has become extremely appealing as a result of recent competitive pricing increases. Plus, no one could have predicted WarnerMedia's promise that in 2021, every single one of its films would be released in cinemas and on HBO Max at the same time.
The films will be available for one month on HBO Max before being removed from the platform for a period of time. When Wonder Woman 1984 was first published on the platform, it sparked a lot of buzzes. And it can give NFLX a run for its money in 2021 with a strong content slate.
Is AT&T Stock a Buy Now!? | T Stock Analysis |
Over the last decade, AT & T has raised its dividend nine times. However, owing to unforeseen circumstances, we are unlikely to see a trek this year or next. Investors who are used to yearly dividend hikes may be disappointed by the recent statements. However, its dividend yield remains the highest among its peers.
The only company that comes close to matching its 7.2 percent yield is China Mobile (NYSE: CHL). Furthermore, despite spending $14.82 billion on quarterly payouts of 52 cents per share, AT&T's dividend cover is 0.7x. Dividend increases should continue once things begin to return to normal.
And, as a shareholder, I'd like to see the business deleverage and focus on 5G and HBO Max for the time being. Long-term shareholder value will be created, which is more important than an annual dividend increase.
You don't want to miss out on the opportunity to add this to your portfolio at a discount. Faizan Farooque had no holdings (direct or indirect) in the securities mentioned in this article as of the date of publishing. Faizan Farooque contributes to a number of financial websites, including InvestorPlace.com.
Faizan has worked as a data journalist for S&P Global Market Intelligence and has extensive expertise in researching the stock market. His goal is to assist ordinary investors in making better-educated portfolio choices.