The M&A market is heating up.
And the latest rumored merger involves the second-largest wireless operator, AT&T, and one of America’s top satellite TV providers, DirecTV.
The telecom giant is reportedly in talks to buy the satellite TV provider for a whopping $50 billion, or roughly $95 per share.
And according to reports, the deal, which could be completed in as early as two weeks, would give AT&T 27 million subscribers for PAY TV. Thus, creating a pay television giant close in size to where Comcast, the parent company of NBCUniversal, will be if it completes its pending acquisition of Time Warner Cable.
(Watch: Why AT&T wants DirecTV)
Now, shares of AT&T are in the red over the past 12 months, while DirecTV has rallied more than 50 percent. But, should you buy AT&T on this mega-deal?
“We believe this is an overleveraged story,” said Chad Morganlander of Washington Crossing Advisors.
And his reasoning is all in the numbers.
“When you go through the numbers you have a total revenue of about $165 billion. Total overall market cap with DirecTV would be about $235 [billion]. But they have about $95 billion of combined debt,” Morganlander pointed out. “We tend to shy away from companies with a lot of debt.”
And in the case of AT&T, the technicals are just as bearish.
“AT&T is a stock and a chart that I would not chase here,” said Richard Ross of Auerbach Grayson.
Ross said despite a recent rally from the 2009 lows, the AT&T chart has formed a bearish double top and run into some key technical resistance long term.
Bearish chart for AT&T.
Do you agree with Ross and Morganlander’s bearish views on AT&T? Check out the video and make the call.
- Financials Industry