Please visit this link for our full article posted on December 8th, 2022: Verizon: An Opportunity Too Good To Miss
We believe that macroeconomic pressures, rising interest rates, and soft operational results put Verizon’s (NYSE: VZ) stock into a 12-year low. The shares are now trading at 6.3x forward EV/EBITDA, lower than T-Mobile (9.2x) and AT&T (6.8x). But the question that investors should ask is whether VZ’s fundamentals are significantly worse than before.
VZ could reverse the Consumer postpaid phone net loss trend thanks to the 5G entry-level plan introduced earlier and promotions during the holiday shopping season. Additionally, while we agree that the mobile market industry is getting more competitive due to CableCos as MVNOs, VZ is catching up with T-Mobile thanks to its C-band spectrum deployment.
In addition, VZ’s growth story remains. The sweet story of fixed-wireless broadband services is still intact, and VZ’s extensive mmWave band spectrum holdings could prove to be an advantage in the enterprise market.
Furthermore, we like VZ’s ability to generate cash flows consistently, the company’s higher-than-peers ROE, and its attractive valuation. Yet its massive amount of debt remains a concern. As a result, refinancing-likely coming with higher rates-could be the case next year. In conclusion, we believe that it is a good start at $37 per share (7% dividend yield).
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