A Beacon of Hope for Verizon Shareholders
After years of underperformance, Verizon Communications (NYSE: VZ) is finally showing signs of a turnaround. Despite a 15% decline in value over the past five years, the telecom giant is poised to end 2024 with a positive return. But what’s driving this shift, and is it time to invest in Verizon stock?
Navigating Industry Transformation
Verizon is adapting to a rapidly changing telecommunications landscape. Traditional growth drivers, such as mobile device sales, are declining as consumers increasingly buy directly from brands like Apple. Meanwhile, the company is selling less networking equipment due to the waning relevance of legacy wireline phone services. In this competitive environment, Verizon must innovate to stay ahead.
A Glimmer of Hope in Wireless Services
Despite flat revenue and a 2.5% decline in adjusted earnings per share (EPS) in the third quarter, Verizon’s wireless services revenue increased by 2.7%. This growth is driven by premium offerings and higher pricing, with a notable 4.2% increase in consumer wireless average revenue per account (ARPA) to $139.
Acquisition of Frontier Communications
Verizon’s acquisition of Frontier Communications is a strategic move to strengthen its position in the broadband market. By leveraging Frontier’s fiber optic infrastructure, Verizon can drive long-term growth and improve its competitive edge.
Commitment to Shareholders
Verizon has reaffirmed its commitment to paying down debt and supporting its dividend, which has seen its 18th consecutive annual rate increase. The company’s leverage ratio has declined, and its $14.5 billion in free cash flow generated through the first nine months of the year more than covers its dividend payments.
Wall Street Predictions
Analysts predict Verizon’s annual revenue will increase by 0.4% this year, followed by a more robust 1.9% growth rate in 2025. Adjusted EPS is expected to rebound from a -2.3% decline in 2024 with a 2.8% increase, reaching $4.73 in 2025.
Value Opportunity
Verizon’s outlook may not be flashy, but its 6.7% dividend yield is among the highest in the S&P 500. This high-yield opportunity means investors can earn a substantial income while waiting for the turnaround to materialize.
Bullish Case for Verizon
The company’s results over the next few quarters could outperform expectations, serving as a catalyst for the stock to rally higher. With strong fundamentals and long-term potential, Verizon is a good addition to a diversified portfolio. While its chart may not be a straight line higher, shares are likely to be at a higher price by this time next year.
Leave a Reply