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- Verizon (NYSE:VZ) is 2.3% lower today following a downgrade to Neutral at J.P. Morgan, which sees slowing phone growth for the company - and the wireless sector at large.
- "We are increasingly concerned about the subscriber growth outlook for postpaid phones in 2022 for Verizon and the industry overall," analyst Philip Cusick writes - and not only for the seasonally soft Q1, during which he expects Verizon will post subscriber losses.
- AT&T and T-Mobile preannounced some solid phone additions for the fourth quarter, and they're still "highly competitive" for new customers and the shrinking pool of switchers.
- Expecting industrywide postpaid phone subs to decline to 7.81 million this year from 9.4 million last year, the firm is now forecasting full-year phone net adds for Verizon of 750,000 (mostly in Business), down from a previous 875,000 - and for the company to lose a net 125,000 in Q1.
- J.P. Morgan is estimating 2022 consumer service revenue growth of 8.8% as reported, and 3.3% excluding TracFone. Consumer revenue growth is seen at 7.1%, with EBITDA growing at 3%.
- "Competition remains high in wireless and likely gets more difficult as new supply comes on from C-band, T-Mobile’s 2.5 GHz spectrum, Dish’s eventual launch, and cable’s small cell efforts," the firm says. "Beyond fixed wireless broadband, this additional capacity could incent carriers to chase incremental subscribers or usage, resulting in even less competitive discipline than we have seen in recent times."
- Cusick and team expect limited growth upside for Verizon in wireless, no near-term share buybacks (given the spending for C-band spectrum), and a potential headwind from rising rates.
- A price target cut to $56 from $62 now implies 8% upside for Verizon.
- Peer AT&T (NYSE:T) is 3.6% lower now despite reporting a strong earnings beat today.