Arguably, the two deepest discounted major companies in America are telecoms AT&T Inc (T) and Verizon Communications (VZ), selling for just 8.1 and 9.8 times expected next 12 months earnings, respectively, asserts Roger Conrad, editor of Conrad's Utility Investor.

That’s despite both reporting strong Q3 revenue and earnings gains that continued the upside business momentum of the first half of the year, and promise more ahead.

In AT&T’s case, the discount is at least partly due to management’s indecision to date about what its dividend will be, following the spinoff/merger of Warner Media with Discovery Inc (DISCA). That question unfortunately won’t likely be answered until the close, meaning at least Q1 2022, and until then the discount is unlikely to narrow much.

But in the meantime, the telecom unit is gaining customers even as Warner Media sales recover from the pandemic. That’s the basis for two healthy halves trading as separate companies next year. The stock’s a buy for the sum of its parts up to $32.

It’s somewhat more difficult to get a handle on why Verizon trades at almost as deep a discount, especially after raising guidance following another solid earnings report. The company is also fresh off a dividend increase and is attracting fiber broadband and 5G customers faster than expected.

I suspect investors’ tepid reaction to the company’s good news has to do with continuing uncertainty about what kind of bottom line impact 5G adoption will ultimately have. And that too is a question to be answered only over time.

But for now, expectations are very low, which means they won’t be very difficult to top. And risks to guidance appear to be mild as well, as the company sticks to its strategy of deploying the best technology and attracting and holding the best customers. Verizon is a buy up to $65.

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