Verizon Faces Challenges Amid Market Recovery
New York-based Verizon Communications Inc. (VZ) offers a wide range of communication, technology, information, and entertainment services to consumers, businesses, and governments. With a market cap of $172.8 billion, VZ stands as the largest telecommunications firm in the U.S., providing wireline voice, data services, wireless, and internet solutions.
Stock Performance Shows Weakness Compared to Market
Over the last year, shares of Verizon have struggled compared to the overall market. VZ has seen a gain of 14.6%, which pales in comparison to the S&P 500 Index ($SPX), which surged nearly 32.7%. In 2024, VZ’s stock has climbed 9.4% year-to-date, while the S&P 500 increased by 21.2% in the same period.
ETF Comparison Highlights Underperformance
When looking closer, VZ has also fallen behind the iShares U.S. Telecommunications ETF (IYZ), which rose about 20.2% over the past year. Its YTD gains of 14.8% further exceed those of Verizon’s stock during this time.
Economic Challenges Impacting Growth
The recent struggles for Verizon can be attributed to economic difficulties from the pandemic and inflation. Consumers and businesses have faced tough conditions, leading to a slowdown in phone upgrades. Nevertheless, the introduction of AI-powered phones and the potential acquisition of Frontier Communications Parent, Inc. (FYBR) could potentially stimulate growth moving forward. While this acquisition may increase the company’s debt load, it also offers a chance to expand their fiber network, though rising interest rates could pose a risk.
Q3 Results Show Mixed Performance
On October 22, VZ shares fell over 5% following the announcement of its Q3 financial results. The company reported an adjusted earnings per share (EPS) of $1.19, slightly surpassing Wall Street’s expectation of $1.18. However, its revenue came in at $33.3 billion, missing analysts’ forecasts of $33.5 billion. Verizon anticipates a full-year adjusted EPS between $4.50 and $4.70.
Analyst Predictions and Ratings
For the current fiscal year, which ends in December, analysts project that VZ’s EPS will decline by 2.1% to $4.61 on a diluted basis. Despite recent setbacks, Verizon has a solid earnings surprise history, beating consensus estimates in each of the last four quarters.
Among the 23 analysts reviewing VZ stock, the consensus rating is classified as “Moderate Buy.” This breakdown includes seven “Strong Buy” ratings, two “Moderate Buy” ratings, 13 “Holds,” and one “Strong Sell.” This rating is less optimistic than it was a month earlier when eight analysts recommended a “Strong Buy.”
On October 29, DBS analyst Sachin Mittal reaffirmed a “Buy” rating for VZ, with a price target set at $49, suggesting an 18.8% potential upside from current levels. The consensus mean price target of $46.28 indicates a 12.2% increase from VZ’s current price, while the highest target of $55 implies a promising 33.3% upside.
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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.
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