New York-based Verizon Communications Inc. (VZ) provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities. Valued at $172.8 billion by market cap, VZ is the largest telecommunications company in the U.S. that provides wire line voice, data services, wireless, and internet services.
Shares of this telecommunication giant have underperformed the broader market considerably over the past year. VZ has gained 14.6% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 32.7%. In 2024, VZ’s stock rose 9.4%, compared to SPX’s 21.2% rise on a YTD basis.
Narrowing the focus, VZ has lagged behind the iShares U.S. Telecommunications ETF (IYZ). The exchange-traded fund has gained about 20.2% over the past year. Moreover, the ETF’s 14.8% gains on a YTD basis outshine the stock’s returns over the same time frame.
The recent underperformance of VZ can be linked to economic challenges stemming from the pandemic and inflationary pressures. Both consumers and businesses have faced difficult conditions, leading to a slowdown in phone upgrades. However, the introduction of AI-powered phones and Verizon's potential acquisition of Frontier Communications Parent, Inc. (FYBR) could spark growth in the near future. While the acquisition may increase debt, it also presents an opportunity to expand their fiber network. Interest rates, though, remain a concern in this scenario.
On Oct. 22, VZ shares closed down more than 5% after reporting its Q3 results. Its adjusted EPS of $1.19 surpassed Wall Street expectations of $1.18. The company’s revenue was $33.3 billion, missing Wall Street forecasts of $33.5 billion. VZ expects full-year adjusted EPS to be between $4.50 and $4.70.
For the current fiscal year, ending in December, analysts expect VZ’s EPS to decline 2.1% to $4.61 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.
Among the 23 analysts covering VZ stock, the consensus is a “Moderate Buy.” That’s based on seven “Strong Buy” ratings, two “Moderate Buys,” 13 “Holds,” and one “Strong Sell.”
This configuration is less bullish than a month ago, with eight analysts suggesting a “Strong Buy.”
On Oct. 29, DBS analyst Sachin Mittal maintained a “Buy” rating on VZ with a price target of $49, implying a potential upside of 18.8% from current levels.
The mean price target of $46.28 represents a 12.2% premium to VZ’s current price levels. The Street-high price target of $55 suggests an ambitious upside potential of 33.3%.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
