Stock Market Today, Oct. 9: AT&T Slides on SpaceX Spectrum Deal Threat

AT&T (NYSE:T), a wireless and fiber connectivity giant, closed at $22.17, down 9.81%. Space Exploration Technologies' spectrum deal raised competitive concerns for legacy wireless providers, and investors are watching Q3 earnings for guidance and subscriber trends.
Trading volume reached 140.3M shares, coming in about 182% above its three-month average of 49.8M shares.

How the markets moved today

The S&P 500 closed at 7,811, up 0.59%, and the Nasdaq Composite ended the trading session at 27,366, up 0.64%. Among integrated telecommunications services: wireless, fiber broadband, and enterprise connectivity peers, Verizon Communications (NYSE:VZ) closed at $41.65, down 8.75%, and T-Mobile US (NASDAQ:TMUS) closed at $148.58, down 13.27%, as sector rivals also absorbed the SpaceX spectrum news.

What this means for investors

The news from SpaceX hit AT&T and the other communication stocks hard because it undermined one critical pillar of their investment cases — the competitive landscape.

Before SpaceX acquired this spectrum, investors perceived these three telcos as an oligopoly. These companies spend tens of billions of dollars every year to update and maintain their wireless networks. That cost and the prospect of low returns for a new market entrant made it unlikely that additional companies would try to compete in this space.

Now with SpaceX possibly on track to become America's fourth wireless carrier, that investment thesis no longer applies. Moreover, SpaceX could combine its satellite connectivity with a terrestrial wireless network, providing a level of rural coverage that might be cost-prohibitive for the legacy carriers.

However, the decline might be a buying opportunity for AT&T stock. Its revenue and net income continue to grow, and the company generates sufficient free cash flow to maintain its $1.11-per-share annual dividend, which yields about 5%. That cash return and its P/E ratio of 7 might prompt more investors to buy the stock.

Additionally, given that AT&T offers fiber-based services, a mass exodus of AT&T customers is unlikely in most areas. That suggests the effects of possible competition from SpaceX may not be as negative as some investors think.

Will Healy has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.