Falling knife or bottom fisher’s buy? That’s the debate among investors and market pundits when it comes to AT&T (NYSE:T). Sinking around 21% this year following a negative reaction by dividend investors to its restructuring plans, on one hand T stock looks like a deep value play.

At least, that is if you assume that both the company itself and the shares of Discovery (NASDAQ:DISCA), (soon to be Warner Bros. Discovery) shareholders will receive will soar in the years following the divestiture.

On the other hand, Ma Bell looks like a value trap. That is a stock that’s cheap on paper, but in practice fails to unlock its underlying value due to poor management decisions. It may be trying to convince the investing public that its latest gambit will pay off. Yet given how bad its past strategic moves have panned out, there’s merit in viewing these latest plans with a critical eye.

What’s my view? I’m leaning toward the former position. However, running into it today may not be the best move. Slowly easing into it or waiting for another drop may be the better move.

Why T Stock Continues to Drift Lower

When it comes to AT&T’s restructuring, most of the focus has been on the company’s planned dividend cut. Admittedly, that’s not a surprise. Going back to the days of the Bell System, it’s been a widow-and-orphan stock. A boring, slow-growing company, but sporting a high, consistent dividend.

This, of course, has gone out the window. Following the reverse Morris Trust transaction that will split its media and telecom unit, it will no longer be paying $2.08 per share in annual dividends. As a result, the market has re-priced T stock. Per calculations from my InvestorPlace colleague Mark Hake, post-spinoff, the effective forward dividend yield of shares will likely be around 6.5%, in line with its average yield in recent years.

Coupled with pessimism over the prospects of Warner Bros. Discovery (which will have the ticker symbol WBD), investors have little confidence that this deal will help unlock hidden value, despite the solid “sum of the parts” arguments commentators have made since the restructuring was announced.

Still, I wouldn’t assume that both T and WBD stock will deliver middling returns for investors. While far from certain, each one could see a big jump in price in the years following the divestiture.

Looking for a Surge in the Coming Years

Value investors buying T stock in the past six months have seen their positions slowly sink underwater. But after its 21% slide in price, it may be getting to a point where it’s been oversold. At today’s prices (around $23.75 per share), potential long-term upside may vastly exceed further near-term downside.

This is mainly due to the soon-to-be WBD stock making a comeback. As a Seeking Alpha contributor recently argued, growth of its Discovery+ and HBOMax streaming platforms plus cost-cutting could result in shares of the media spinoff doubling in value by 2025, implying a future value for WBD stock that equates to $10 per share in value for AT&T shareholders.

What about the shares in the core telecom business? These, too, could appreciate in value in the years ahead. With the spinoff lightening its debt load to the tune of $43 billion, plus the potential for growth thanks to the 5G rollout, investors could in time warm back up to AT&T, giving it an EBITDA multiple more in line with rival Verizon Communications (NYSE:VZ). At today’s prices, Verizon’s enterprise value/EBITDA ratio is around 7.6x.

Over the past 12 months, AT&T has reported EBITDA of around $53 billion. Assuming EBITDA for the WarnerMedia segment has held steady, if we subtract its 2020 full-year EBITDA (around $8.9 billion), we get $44.1 billion in EBITDA for the core business. Multiply that by 7.6x and enterprise value comes in at around $335.2 billion. Subtract its post-divestiture debt position ($166.5 billion), and add in its cash position ($21.3 billion). After all this back-of-the-envelope math, we get around a $190 billion net value, or around $36.60 per share.

Wait for Another Drop Before Buying AT&T

Put together my potential value estimates for both the telecom and media pieces of AT&T and what’s trading for around $23.75 per share today could eventually be worth $36.60 per share.

However, don’t rule out the risk that it drops further in the meantime. If DISCA stock keeps falling or if the dividend cut winds up more severe than expected, shares could dip below $20 per share before the restructuring wraps up.

Despite this wide spread between its current stock price and potential value, you may still want to wait before buying T stock.

On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.