🌎 30+ NEW AI-picked share strategies for exciting international marketsUnlock Global AI Picks

KeyBanc cuts Verizon target with overweight ratings

EditorTanya Mishra
Published 06/09/2024, 18:56

VZ
1.15%


KeyBanc made adjustments to its outlook on Verizon Communications (NYSE:VZ), reducing the price target to $44 from the previous $46 while keeping an Overweight rating on the stock. The adjustment follows Verizon's recent announcement of the FYBR acquisition, which has led to a reassessment of the company's valuation multiple.


The firm acknowledges the improvement in Verizon's key performance indicators and business fundamentals but notes that the anticipated bull case for capital returns through buybacks is unlikely to materialize until 2027-2028. The acquisition of FYBR is seen as a questionable use of capital because it is expected to dilute free cash flow, earnings per share, and leverage while offering only a slight boost to growth.


The analyst from KeyBanc points out that Verizon's current buyback yield and dividend yield might provide a higher return on invested capital compared to the FYBR acquisition, especially given FYBR's valuation. The analyst also highlights that Verizon must now demonstrate the financial benefits of its strategy to bundle mobile and broadband services, a process that is expected to take several years.


Meanwhile, investors have the option to invest in AT&T, which is currently trading at a discount and carries lower leverage than Verizon's projected post-acquisition financials.


In other recent news, Verizon Communications has been in the spotlight for its financial performance and strategic moves. The company reported a steady increase in its Q2 2024 financial performance, with a 3.5% year-over-year increase in wireless service revenue, contributing to a total consolidated revenue of $32.8 billion.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.


Adjusted EBITDA for the same quarter rose to $12.3 billion, marking a 2.8% increase from the previous year.


Verizon has also confirmed its guidance for 2024 and announced an increase in its quarterly dividend. Furthermore, the company has announced its plans to acquire Frontier Communications (OTC:FTRCQ) in a $20 billion all-cash transaction, aimed at expanding its fiber optic network.


This acquisition is expected to finalize within 18 months and contribute positively to Verizon's revenue and adjusted earnings.


Analysts from Citi and TD Cowen have maintained their Buy ratings for Verizon, highlighting the company's readiness for Generation AI fiber deals and the completion of C-Band spectrum deployment by the end of 2025.


InvestingPro Insights


As Verizon Communications (NYSE:VZ) navigates the waters post-FYBR acquisition, it's important to consider the company's financial health and market sentiment. According to InvestingPro data, Verizon holds a market capitalization of approximately $173.64 billion, with a P/E ratio of 15.48, reflecting a valuation that considers its stable earnings history. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands at a lower 10.17, suggesting a potentially more attractive valuation in the context of its historical earnings.


InvestingPro Tips highlight that Verizon has consistently rewarded shareholders, raising its dividend for 20 consecutive years and maintaining dividend payments for 41 consecutive years. This commitment to shareholder returns is further evidenced by a substantial dividend yield of 6.44%. Furthermore, Verizon's stock is characterized by low price volatility, which may appeal to investors looking for stable investment options in the Diversified Telecommunication Services industry.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.


While 10 analysts have revised their earnings downwards for the upcoming period, it is noteworthy that Verizon is trading near its 52-week high, with the price at 95.28% of this peak. This could indicate that the market is recognizing the company's profitability over the last twelve months and its status as a prominent player in its industry. For investors seeking a deeper dive into Verizon's prospects, InvestingPro offers additional insights, with a total of 11 tips available on their platform.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

VZ: is this perennial leader facing new challenges?

With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Sure, there are always opportunities in the stock market – but finding them feels more difficult now than a year ago. Unsure where to invest next? One of the best ways to discover new high-potential opportunities is to look at the top performing portfolios this year. ProPicks AI offers 6 model portfolios from Investing.com which identify the best stocks for investors to buy right now. For example, ProPicks AI found 9 overlooked stocks that jumped over 25% this year alone. The new stocks that made the monthly cut could yield enormous returns in the coming years. Is VZ one of them?

Unlock ProPicks AI to find out

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.