The Simple Reason AT&T Isn't Too Concerned About SpaceX's Starlink Business
Key Points
AT&T CEO John Stankey says Starlink doesn't do so well when buildings get in its way.
SpaceX's Starlink business is still just a small fraction of the size of AT&T.
AT&T stock remains a practical option for long-term investors seeking dividend income and stability.
Shares of telecom company AT&T (NYSE:T) went into a tailspin earlier this year as fears mounted that Elon Musk's company, Space Exploration Technologies Corp (NASDAQ:SPCX), which often goes by just SpaceX, would wreak havoc on its business in the future.
Shortly after SpaceX went public, AT&T's stock ended up hitting a new 52-week low of just under $20. It's gone on to recover from that, however, with investors thinking twice about the risk that SpaceX poses. Competition, after all, is nothing new for AT&T, which has been around for well over a century.
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The risk that SpaceX's Starlink internet business poses to AT&T appears to have been exaggerated, and CEO John Stankey isn't all that worried.
Image source: Getty Images.
Why AT&T isn't overly concerned with Starlink
AT&T's CEO recently highlighted the simple reason he isn't too concerned with SpaceX posing a big threat to its core business. "It doesn't get through buildings very well," Stankey stated at a recent tech conference. "It's not going to penetrate the skin of a high-rise." He also pointed out the high expectations that consumers have for internet service, and that AT&T is in a great position to continue to meet them.
While Starlink's business may be exciting for SpaceX investors, the reality is that it's still fairly small relative to AT&T, which has generated more than $127 billion in revenue over the trailing 12 months. Starlink is part of SpaceX's connectivity segment, which generated $4.3 billion in revenue in its most recent quarter (which ended in June). That would put it at an annual run rate of around $17 billion.
AT&T's stock may not be as exciting as SpaceX's, but it may be a more practical option for long-term investors
SpaceX has attracted plenty of attention from investors since going public a few months ago, with its valuation hovering around $2 trillion today. By comparison, AT&T, whose market cap is around only $180 billion, is just a fraction of the size.
However, with strong fundamentals, excellent numbers, plus a great dividend that yields 4.3%, it's a potentially much more stable investment to consider for the long run. AT&T's stock has been a reliable option for income investors for years, and that's likely to remain the case for the foreseeable future.
Without a massive valuation, the dividend stock looks better suited for long-term investors who want a quality investment to add to their portfolios. It also comes without the risk and volatility associated with a stock as unpredictable as SpaceX.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.