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Verizon Communications Inc VZ

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Morningstar’s Analysis

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Verizon Continues to Build Momentum; Shares Starting to Look Attractive

Analyst Note

| Michael Hodel, CFA |

Verizon’s efforts to attract and retain customers while promoting higher-end rate plans created solid momentum during the third quarter, driving strong wireless service and Fios revenue growth. While rivals haven’t yet reported results, Verizon’s market share is likely tracking a bit higher than we’d expected and revenue per customer is also growing faster than we’d anticipated. On the negative side, part of this growth comes with the added expense of delivering content like Disney+ to customers, which weighs on margins. We have made modest adjustments to our projections, resulting in a fair value estimate increase to $58 per share from $57. With the slide in its shares over the past couple of months, Verizon is starting to look attractive. We continue to prefer AT&T on a valuation basis, though.

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Company Profile

Business Description

Verizon is now primarily a wireless business (more than 70% of revenue and nearly all operating income). It serves about 91 million postpaid and 4 million prepaid phone customers and connects another 25 million data devices, like tablets, via its nationwide network, making it the largest U.S. wireless carrier. The firm has agreed to acquire Tracfone, a wireless reseller that serves about 20 million prepaid customers in the U.S., from America Movil. Fixed-line telecom operations include local networks (12% of revenue) in the Northeast, which reach about 25 million homes and businesses, and nationwide enterprise services (10%). Verizon Media Group, the online media and advertising firm formed with the acquisitions of AOL and Yahoo, provides the remainder of revenue.

1095 Avenue of the Americas
New York, NY, 10036
T +1 212 395-1000
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 132,200