AT&T Stock Has Been Quietly Rallying Since the Start of July. After a Strong Q2, Is It Due to Soar Even Higher?

When Space Exploration Technologies Corp (NASDAQ: SPCX), also known as SpaceX, went public last month, telecom stocks went into a bit of a free fall, as there were growing concerns that it would disrupt the sector. AT&T (NYSE: T), a leader in the space, fell by more than 12% between when SpaceX went public and the end of June.

However, as SpaceX has been struggling of late, AT&T has been bouncing back in a huge way. While SpaceX has crashed 34% since the start of July, AT&T has soared 18%. It may be a coincidence, of course, but it's an intriguing correlation to watch out for. The company is also coming off a solid quarter, highlighting its financial strength and overall resilience. Could the rally for AT&T's stock just be getting started?

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AT&T continues to show steady and solid growth in Q2

Last week, AT&T posted the types of numbers investors have become accustomed to from the business. They weren't flashy, but they were solid nonetheless, and exactly what many investors would want from a top dividend stock. Revenue of $31.6 billion rose by a little over 2%, and diluted per-share earnings of $0.66 were also higher than $0.62 in the prior-year period.

The company reported that there were 646,000 advanced connectivity internet net adds during the period, higher than the 584,000 in the first quarter. It also reported 432,000 postpaid phone net adds, up from 294,000 in Q1. Overall, AT&T's business has continued to add customers, perhaps alleviating some concerns investors may have had about the stock heading into earnings.

Is AT&T stock heading higher?

With its recent rally, AT&T's stock is back up to where it was at the start of June -- before concerns about SpaceX began to weigh on its valuation. I believe the market overreacted to some extent to SpaceX and the risk it posed to AT&T, and now that that has cooled, AT&T's stock has been recovering.

I'm optimistic it can still rise further, especially in the long run, as AT&T trades at just 10 times its estimated future earnings (based on analyst estimates). While it may not produce massive gains for investors, there is still some upside here. With an attractive valuation and a 4.6% dividend yield (which is far higher than the S&P 500 average of 1.1%), this can be a solid investment to hold on to for the long haul.

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.