On Monday, Bernstein SocGen Group initiated coverage on stock of Verizon Communications (NYSE:VZ) with a Market Perform rating and a price target of $48.00. The new coverage highlights the challenges and opportunities facing the telecom giant, including competitive pressures and strategic initiatives.
According to InvestingPro data, Verizon's stock has shown strong momentum with a 19.87% year-to-date return and currently trades near its 52-week high of $45.36. The company's Fair Value analysis suggests the stock is fairly valued at current levels.
Verizon, while being the largest telecom operator in terms of market share, has faced intense competition from rivals like T-Mobile and various Cable MVNOs. The company's share of postpaid net additions has been trailing behind the market, marking the lowest among major MNOs.
Nevertheless, the new management team, which has been steering the company since last year, is credited with improving operational metrics, particularly postpaid net additions.
InvestingPro analysis reveals Verizon as a prominent player in the Diversified Telecommunication Services industry, maintaining a robust dividend yield of 6.4% and an impressive track record of 41 consecutive years of dividend payments.
A significant development for Verizon has been the introduction of Fixed Wireless Access (FWA) in 2021, which has been a transformative move for the company. Verizon achieved their subscriber target of 4-5 million subscribers one year ahead of schedule and expects to double their forecast in the coming five years. This growth in FWA subscribers is expected to contribute to the company’s margin expansion in the near term.
Despite these advancements, Verizon's growth in broadband is seen as potentially constrained by its second-largest but stagnant fiber footprint, which has not seen the same level of expansion as competitor AT&T. This limitation could curb Verizon's broadband growth beyond its FWA guidance and limit bundling opportunities, which are important for gaining additional wireless share.
The upcoming Frontier deal is Verizon's strategic response to this challenge, with the transaction expected to close in 2026. The implications of this deal on Verizon's growth and bundling opportunities will be closely monitored.
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