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The Good News and Bad News at Verizon
Stock Analysis & Ideas

The Good News and Bad News at Verizon

Telecom giant Verizon (VZ) recently brought out its earnings report. It offered some bright spots, as well as some clear future issues going forward.

The company slipped 3.2% in premarket trading on Friday, and those losses continued into Friday’s trading session. However, I’m bullish on Verizon, because as a major provider of necessary communications services, it’s not likely to lose a lot of ground even in bad times.

The last 12 months for Verizon shares offer a look at its sheer resilience. A spike in early May quickly retraced. That ultimately began a fall for the company that lasted nearly the rest of 2021. December 1, however, saw the company start a comeback that would first falter, then recover, and falter and recover again to get us to the present day.

The latest news, meanwhile, gave Verizon something of a mixed picture going forward. The company posted earnings and revenue that essentially proved a match for projections. It posted $1.35 per share in earnings, excluding some items, and this was basically what Street estimates called for.

Revenue, meanwhile, came in at $33.6 billion, again basically a match for expectations. The company also noted that it had lost fewer subscribers than expected.

FactSet estimates expected Verizon to lose 49,300 subscribers for the first quarter. The company actually reported 36,000 had jumped ship.

Wall Street’s Take

Turning to Wall Street, Verizon has a Moderate Buy consensus rating. That’s based on two Buys and four Holds assigned in the past three months. The average Verizon price target of $59.17 implies 14.6% upside potential.

Analyst price targets range from a low of $56 per share to a high of $64 per share.

Investor Support Abounds

Investors should be pleased with the sheer level of investor support that Verizon carries right now. From insiders to hedge funds and beyond, everybody’s getting on the Verizon bandwagon.

Based on the TipRanks 13-F Tracker, hedge fund involvement actually rose for the first time in around a year in the space between September and December 2021.

Insider trading at Verizon is much more buy-oriented. While there was selling activity for each of the last 12 months, and buying for only nine of the last 12, there ultimately proved to be an even match.

Retail investors as well are moving into Verizon shares. In the last seven days, portfolios holding Verizon shares rose 1.1%. In the last 30 days, that expands to 9.3%.

Finally, there’s the matter of Verizon’s dividend history. The dividend isn’t particularly large at $0.63 per share. However, it has been steadily increasing over the last four years.

Major Name Offering a Necessary Service

Verizon is coming under increasing fire from its biggest competitors, AT&T (T) and T-Mobile (TMUS). Verizon also seems to be shying away from some potential opportunities. One of the biggest of these is bringing 4G LTE home Internet to rural areas that don’t have it. T-Mobile, meanwhile, has been pursuing that market avidly for some time now.

The macroeconomic picture will impact Verizon, but likely not very far. Cell-phone-only homes have dominated the U.S. landscape since 2017, reports note. Suggesting that even recession would prompt these homes to throw over their primary means of communication would be a bridge too far.

Additionally, Verizon has worked to make its service more palatable for customers. Recently, Verizon’s +play streaming aggregator added HBO Max to its lineup. Verizon customers will be able to access the service starting later this year, reports note, and for no additional cost.

For the most part, Verizon is likely to at least keep its current customer loadout. A 2017 study noted that only 12% of respondents were “very likely” to change their service provider in the next 12 months. Fast forward to the present day, and only 13% were likely to change their service provider.

Concluding Views

Verizon will have its work cut out for it going forward. It’s got quite a bit of competition in the field, and it’s going to have to fend off two major names looking to land what share of the market they can.

However, that doesn’t diminish Verizon’s attractive points. It’s got a ton of investor support right now. Plus, it’s also got very positive numbers and outlook. It’s trading below its lowest price targets.

That in turn means upside potential is not only present, but substantial. For income investors, it’s got a dividend sufficiently stable to last through a pandemic.

In the end, Verizon offers a very necessary slate of services that should leave it resistant to economic downturn of the kind we’re likely facing in the near future.

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