Telecom provider AT&T (T) is up 44% over the past year, more than doubling the return of the S&P 500. One trader sees further upside ahead for shares in the coming weeks.
That’s based on the October 25 $21.50 calls. With 44 days until expiration, 4,936 contracts traded compared to a prior open interest of 115, for a 43-fold rise in volume on the trade. The buyer of the calls paid $0.63 to make the bullish bet.
AT&T shares recently traded for about $21.40, making this an at-the-money trade. Shares just hit a new 52-week high this week, adding to gains over the prior months.
Even with the recent gain, AT&T trades at 9 times forward earnings. Revenues were flat over the past year, and overall earnings declined amid the rise in share price.
AT&T continues to have steady cash flows, and the company is working to pay down its hefty $150 billion in debt, while also paying a sizeable dividend.
Action to take: With shares in an uptrend, momentum investors may like the stock here. Shares pay a 5.3% dividend. While that yield is unlikely to increase anytime soon, with interest rates coming down, the high yield could help push shares higher in the quarters ahead.
For traders, the October $21.50 calls could see high double-digit returns if shares continue their current momentum.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.