Braytech Investment Opportunity: Critical Analysis of Investment in AT&T

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Braytech Investment Report

Problem: Braytech investment opportunity.
Purpose: Identify the investment opportunity for the Braytech Company
Problem: AT&T offers has been profitable in recent years, it has good investor rating and invests adequately in CSR and founded on excellent business ethics.

Executive Summary

This report is aimed at exploring an investment company that Braytech will invest its resources following recent margins it accumulated. The focus was to establish a company worthy of short and long term investment. Among the factors for consideration included are financial performance in recent years and the prospect for growth. The report also considered the relationship that the business with its employees, competitors, and the community. Thus, the aim was to establish a company that is financially viable and enjoys a good market rating and also strong business ethics. Braytech would prefer a company that believes in community development, and therefore, the focus was put on corporate social responsibility. AT&T was the investment destination that best suits the desires of the company. It has excellent financial standing with reasonable investor valuation. The business strategy aims at satisfying customer quality concerns. It gives back to society through support programs to uplift the marginalized. The codes of ethics are also satisfying considering the priority placed on the environment and human rights. Therefore, investment in AT&T is well informed considering the market share and revenue growth prospects the company anticipates together with the strong social responsibility and ethical values guiding the company.

Introduction

Braytech Company focuses its operations on technological-related businesses. Having registered pleasant results in the market, the need to invest in an alternative source of revenue would be best in a company that also deals with technology. AT&T, as a telecommunication company, will serve a perfect investment opportunity for Braytech. AT&T has a long history of operation, having been established in 1885. The company is the world’s largest telecommunication company and has the largest market share in the United States in terms of mobile telephones services. The company is quite successful, considering that it registered a total revenue of $170.8 billion at the end of the 2018 fiscal year (AT&T). Today, the company enjoys more than 400 subscribers across the Americas. AT&T has been listed in the Fortune best 100 company to work for in the year 2018. In 2017, it was named by Fortune Magazine in the world’s most admired company. The prospects of the company remain great, considering the series of awards it has received for its innovative practices. AT&T has registered tremendous success in the telecommunication industry prompting the need to assess its suitability as an investment destination by considering its CSR, revenue and business strategy.

Corporate Social Responsibility

Companies exist not only to make a profit but also to better the lives of the societies from which they get their companies. AT&T is one of the companies that invest robustly in their corporate social responsibility. Braytech will find the company quite attractive based on the fact that it also subscribes to the belief that giving back to society is a responsibility that each organization should take seriously. AT&T has a wide range of programs it supports under its CSR. As a company that rides on inclusivity and support for diversity, Braytech will find the company worth investing because of the support it gives to often marginalized groups like women. In the last five years, the company has invested at least $12 million in support of young women studying (STEM) science, technology, engineering, and mathematics (AT&T). Under its program titled shape, AT&T has deliberate plans to support women’s education and nurtures talent. The company funds the Girl Scout Leadership Experience (GSLE), which helps under-resourced girls develop their talents and skills. The company’s CSR projects aim at achieving long term benefits for the community and customers. According to Apics magazine, AT&T invests in a wide range of sustainability programs hinged on achieving a better future. Under the “Connect good” road map, “AT&T will see carbon savings ten times the footprint of its operations by 2025” (Apics). The company’s concern over the environment resembles Braytech objectives. The investment in the company will, therefore, come with great advantage in terms of support in achieving the environmental goals.

Revenue and Growth

Investing in companies that have proven success records in terms of growth and revenue generation is better than investing in one with future plans of success. AT&T has a good history of success in terms of revenue generation and growth. In the financial year ending in 2018, the company collected a revenue of $170.756 billion, which was an increase of 6.36 percent from the previous fiscal year (Macro Trends). The company has shown tremendous growth in revenue in the recent past in its revenue collection, making it a worthy company for investment. In the last fiscal year, AT&T hit a record profit of $91.337 billion, which has a 10 percent increase from the previous year. The fact that the company makes huge profits makes it a proper investment platform for Braytech to generate back its investment in the short run.

A worthy investment is one in with attractiveness. AT&T shows from its operation that it is a perfect business for investment based on the statistics on price per earnings ratio. Macrotrends establishes that the company has a P/E ratio of 10.3 as of October 2019. The high P/E ratio shows that the company’s stock is highly valued in the market. Braytech should consider investing in the company because of the market attractiveness that it enjoys. Another reason to invest in the company comes from the satisfaction developed as a result of the P/S ratio. Since 2012, the market has not shown any doubt in the value of the market. Interestingly, with the 1.01 P/S ratios in 2012, the ratio has been in an upward trajectory with 2019 registering 1.45, the highest ratio in over 10 years (macrotrends). The fact that investors are continuously willing to pay more demonstrates the attractiveness of AT&T that Braytech should also strive to enjoy.

Year

2017

2018

2019

Revenue Growth

$160.546B

$170.756B

$183.516B

Table 1; revenue growth for AT&T (macotrends, 2019)

Business Strategy

The business strategy used by AT&T makes it a better option to invest in because of the guarantee of continuity in operation as well as profitability. The company diversifies its operation makes it tap on a revenue multiple sources. The revenue it collects comes from communication services, pay-TV, Latin America, and Xander. While AT&T generates most of the income from wireless phone services, it has significant investment in the pay-TV, which is becoming one of the largest in the market. The segmentation of the company comes with the assurance of continued operation and a steady generation of revenue in the future. Such advantages come because each segment deals with unique aspects. The AT&T, Latin America business, constituted 4 percent of the company’s 2018 revenue (McFarlane). The segment raises its revenue through video services via satellite. The fact that the company invests both North and Latin America makes it a perfect venture because of the benefits that come with access to an extensive market.

The company uses the differentiation strategy of providing quality services to its customers. In the competitive market, pricing alone cannot attract customers. AT&T differentiates itself in the market as that company that offers quality services that customers will not find any else. The ability of the company to be the market leader in the provision of quality services comes from the significant investment it has made in the innovation. According to Quentin Hardy, AT&T is working in collaboration with Ericson, and Intel to develop a 5G network will be rolled out before the end of 2019. In its DIRECTV program, AT&T offers over 100 channels of premium content which customers can enjoy. It is because of the quality of the services provided that put among the best in the industry. Braytech, a company that values the provision of quality services, should invest in this company.

Business ethics

The business ethics put in AT&T are a strong factor that influences the success that it enjoys in the market. The company prioritizes on integrity as the basis of its over 140 years of operation. Integrity is essential in any business because it helps in the building of company reputation. As a company that invests significantly in business that deals with personal data, AT&T prioritizes security, and privacy among the core values of its practice. According to AT&T chief Privacy officer, the company runs the privacy office, which is a one-stop office to help address the privacy concerns of customers as soon as they arise (AT&T). In addressing privacy needs, the company invests robustly on security for the safety of confidential data. Besides, the company remains open and transparent in its use of huge data in servers. The company’s transparent practice makes it a desirable venture for Braytech because there is no fear that the company will explore mischievous practices. Moreover, it is healthy to deal with companies that are transparent in their operation and also respects the privacy of its customers. Braytech operates on strong value; thus, partnering with AT&T, which subscribes to the same principles, will help it achieve its objectives.

AT&T puts in place strong ethics policies to govern its operation. The ethics touch on a wide range of issues, such as environmental, social, and governance. In its climate change policy, the company acknowledges the effects of carbon emission on the atmosphere and commits to transition to environmentally friendly strategies. The company also undertakes to shift to alternative energy sources of renewable energy. In terms of social policy, the company commits to upholding every letter of human rights, such as freedom of expression. The business undertakes to respect labor rights and sustainable environmental practices. AT&T has a clearly documented code of business ethics for its proper governance. The codes of ethics apply to every person working to the company regardless of the position. In regards to employee welfare, the company operates health and safety compliance and ensures regular reviews and audits (AT&T). The codes of business ethics set by the company have seen the company receive numerous ethics award. AT&T was named in the GDBEA 2018 honoree for demonstrating a measurable commitment to ethical business practices in everyday operations, management philosophies, and responses to crises or challenges” (Great Dallas Business Ethics Award). The compliance with the business ethics make the company a perfect investment destination that the Braytech should not take for granted.

The market share of AT&T however, is not quite persuasive considering that it does not have a strong grip. The company faces strong competition from Verizon which is the market leader. The market is also crowded with other players also controlling a significant portion of the market. In 2018, Verizon was the market leader controlling 35 percent of the market while AT&T was second with 33 percent and T-Mobile at 17 percent (Macrotrends, 2019). The fact that the company does not a comfortable leader in the market is weakness that may affect choice of the investment.

While it is true that the company does not enjoy the biggest market share, it has gradually grown in the market over the years. Verizon, who enjoys the largest market share, is however, cannot dictate prices because of the insignificant gap it gives to AT&T also the fact that it does not control more than a half of the market. The fact that AT&T does not enjoy highest market does not disadvantage its operations. AT&T is likely to increase its market in the future considering that it intends to roll out 5G which is a new invention in the industry (Hardy). Therefore, AT&T fits a perfect long term investment plan considering that future innovative plan that would help increase the market share.

Recommendations

The services offered by AT&T, such as the internet and networking and wireless broadband, are essential for society day to day operations and will be relevant in the long run. This means that the company has the guarantee of continued operation, offering the same services to a broader market. Therefore, based on the surety of operation, in the long run, Braytech should consider investing in AT&T, not as an afterthought.

The purpose of investment is to raise revenue. The company is in a profitable mode as its profit has been increasing with almost a double-digit percentage. AT&T is in good financial health, and the value in the market is quite incredible. The excellent rating in the market makes the company a good venture that AT&TA should not ignore.

The commitment that the enterprise has with the community, shareholders, and customers demonstrates the company has long term strategies to continue operating. It addresses the issue of marginalization by adequately investing in women empowerment. The code of ethics governing the coming is also robust and covers essential thematic areas of concern. Braytech should find it pleasing that AT&T considers adherence to environmental policies and human rights as integral in its operation.

Works cited

Apics. “AT&T Demonstrates Sustainability Progress: APICS Magazine.” AT&T Demonstrates Sustainability Progress | APICS Magazine, https://www.apics.org/apics-for-individuals/apics-magazine-home/magazine-detail-page/2017/11/02/at-t-demonstrates-sustainability-progress.
“AT&T’s Social Responsibility News.” AT&T’s Social Responsibility News, 10 July 2018, https://about.att.com/aboutus/homepage/att_social_responsibility.html.
Greater Dallas Business Ethics Awards. “AT&T, La Madeleine Named 2018 GDBEA Honorees.” Greater Dallas Business Ethics Awards, Apr. 2018, https://gdbea.org/att-la-madeleine-named-2018-gdbea-honorees/.
Hardy, Quentin. “AT&T’s Strategy Is One Part Innovation, One Part Inspiration.” The New York Times, The New York Times, 13 Feb. 2016, https://www.nytimes.com/2016/02/15/technology/atts-strategy-is-one-part-innovation-one-part-inspiration.html.
Macrotrends. “AT&T Price to Sales Ratio 2006-2019: T.” Macrotrends, https://www.macrotrends.net/stocks/charts/T/at-t/price-sales.
McFarlane, Greg. “How AT&T Makes Money: Mobility, Video, Broadband and More.” Investopedia, Investopedia, 25 Sept. 2019, https://www.investopedia.com/insights/how-att-makes-money/.

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