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October 12, 2017

AT&T Stock Takes A Hit As Cord-Cutting Threat Grows And Time Warner Deal Nears Close

On a break-even day for the stock market, AT&T shares are getting hammered after the company divulged it expects to report a loss of 390,000 video subscribers in the third quarter, renewing concerns about the wages of cord-cutting.

While the company said it will gain 300,000 new subscribers to DirecTV Now, leaving the net loss at 90,000, the rates for that skinny bundle service are considerably lower than AT&T’s other pay-TV options, stoking fears on Wall Street. Midway through the trading day, shares were down more than 4% to $36.60, within a buck and a half of their 52-week low.

“No one should have expected AT&T’s video subscriber results to be good in Q3,” analyst Craig Moffett of MoffettNathanson wrote in a research note. “But we doubt anyone expected them to be this bad.”

Other analysts are a little more sanguine. In a third-quarter media industry forecast released today, Doug Mitchelson of UBS said he expects pay-TV subscriptions overall to decline 0.9% in the quarter compared with the same period last year, even with the first and second quarters. “Contrary to consensus, we believe cord-cutting remains quite stable,” he wrote.

Jennifer Fritzsche of Wells Fargo, meanwhile, said the $85 billion acquisition of Time Warner could close as soon as this month. In a report, she noted Brazilian regulators are meeting Oct. 18 to weigh in, and U.S. regulators should follow quickly with their final review.

AT&T will officially report third-quarter results on Oct. 24.

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