Verizon Communications (NYSE:VZ) was raised to Overweight from Equal Weight at Barclays on Wednesday, with analysts raising the price target on the stock to $38 from $37 per share.
The analysts told investors in a note that the improvement in second derivatives for Verizon is not reflected in the company's current valuation.
"We believe the expected improvement in second derivatives across unit growth, ARPU, service revenue, EBITDA and free cash flow is still not reflected in valuation," the analysts explained.
"Going into earnings, investor sentiment in telecom was quite negative, especially relative to the set up in cable and we had highlighted risk on both sides of this trade and had flagged Verizon as a long opportunity," they added. "However, even we had underestimated how negative positioning was, as evidenced in the significant movies in both T and VZ post results just on signs of stability and improved FCF visibility."
The analysts also noted that postpaid phone net adds at 100k came in better than expected and continued to improve YoY, "which should position the company to post a more normal growth cadence in Q4 compared to the last couple of years where Verizon lost share."
Barclays believes the combination of operational changes earlier this year at VZ retail stores, new pricing tiers, more competitive discipline from its peers, and C-Band deployment should help keep this momentum going next quarter and into next year. As a result, they expect the company’s subscriber performance to continue improving.