While VZ stock has consistently underperformed the S&P 500, the telecommunications giant often attracts income-oriented investors, thanks to its dividend. If 5G wireless services reignite earnings and revenue growth, Verizon stock might have much greater appeal.
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But Samuel Beckett’s popular play “Waiting for Godot” could be pertinent for Verizon stock and 5G wireless services. It’s taking longer-than-expected for 5G synergies to kick in.
Verizon Communications (VZ) has retreated about 6% so far in 2023. Verizon stock fell 24% in 2022, while the S&P 500 fell about 19%.
A Dow component, VZ stock pays a 4.8% dividend.
Verizon reported fourth-quarter adjusted earnings that met estimates, but its 2023 earnings outlook missed. More aggressive wireless promotions, mainly smartphone subsidies, are expected to impact 2023 profit.
Analysts expect 2023 earnings to fall 9% to $4.70 with revenue flat at about $137 billion.
At a recent Morgan Stanley conference, Verizon said it plans to use artificial intelligence technology to improve customer service and lower operating expenses.
Verizon Stock: 5G Network Build-Out Key
New York-based Verizon may be in a tough position as wireless competition heats up with AT&T (T) and T-Mobile US (TMUS), analysts say. Verizon has been losing market share to both T-Mobile and AT&T.
The Verizon brand has lost some oomph as the company fights to regain its marketing claim to operating the highest quality wireless network.
A VZ stock buyback has been delayed by purchases of radio spectrum needed for 5G services. Verizon owns midband and high frequency millimeter wave radio spectrum. Its 5G network now is available to 200 million people in the U.S.
Still, Verizon’s consumer wireless business has yet to get a material revenue lift from smartphone users.
Revenue growth remains an issue. Data-gobbling mobile video hasn’t panned out as a big moneymaker. Verizon has focused on upgrading consumers to unlimited data plans to boost average monthly revenue per user.
Verizon is ramping up 5G fixed broadband services to homes and businesses. Cable TV companies currently dominate in residential broadband. Verizon has stated that its fixed broadband service will reach 30 million homes by the end of 2023.
Verizon expects 5G business services using private network links to gain momentum in 2024. Also, it’s investing in “mobile-edge compute” sites.
Verizon has partnered with Amazon Web Services, the cloud computing arm of Amazon.com (AMZN) to develop 5G apps for the web-connected industrial devices. Another partner is IBM (IBM).
Pundits expect 5G wireless to have a role in manufacturing automation, cloud gaming, autonomous vehicles, drones and remote health care services.
Verizon Stock: Management Shake-up
In addition, Verizon on March 3 announced management changes, including the departure of Chief Financial Officer Matt Ellis.
Verizon also announced that Sowmyanarayan Sampath will become chief executive of Verizon Consumer Group. Sampath earlier led the Verizon Business Group. In December, Verizon let go Manon Brouillette, the head of the struggling consumer business.
Kyle Malady, the head of global networks and technology, will become CEO of Verizon Business Group.
Verizon CEO Hans Vestberg held the same post at network gear maker Ericsson (ERICY) before joining Verizon. Vestberg and Chief Strategy Officer Rima Qureshi, also an Ericsson veteran, both came to Verizon in 2017.
VZ Stock: Market Share Losses
In a bright spot, Verizon in November finally closed the $6.25 billion acquisition of Tracfone from Mexico-based America Movil (AMX). Tracfone sells pre-paid wireless services. If a recession hits, all U.S. wireless firms will step up marketing in the low-end of the wireless market — pre-paid customers.
Verizon’s efforts to diversify into internet content backfired.
Verizon in May 2021 sold a 90% stake in its media and advertising business to Apollo Global Management for $5 billion.
Content partnerships are key.
Verizon has partnered with Walt Disney (DIS) in video streaming services. Verizon also has partnered with Apple (AAPL) for music services and with sports leagues.
VZ Stock Fundamentals
For the December quarter, Verizon earnings were $1.19 an adjusted share, down 10% from a year earlier, excluding items. Revenue rose 3.5% to $35.3 billion.
A year earlier, Verizon earned $1.31 a share on revenue of $34.1 billion. Analysts had projected Verizon earnings of $1.19 a share on revenue of $35.1 billion for the quarter.
Verizon said it added 217,000 postpaid wireless phone subscribers, vs. analyst estimates for a gain of 201,000, including consumer and business subscribers. Verizon added 41,000 consumer subscribers in the fourth quarter. In the September quarter, Verizon lost 89,000 consumer lines.
For 2023, Verizon said it expects adjusted earnings per share of $4.70, at the midpoint of guidance. Verizon did not provide a total revenue outlook. It forecast wireless service revenue growth of 3.5% vs. estimates of 2.5%.
VZ stock analysts polled by FactSet had estimated 2023 earnings at $4.96 per share with revenue edging up 1.2%.
Verizon forecast adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — in a range of $47 billion to $48.5 billion, missing estimates. Analysts had predicted growth of 1.5% to $48.7 billion.
Verizon Stock: Is It A Buy Right Now?
VZ stock holds a Relative Strength Rating of 27 out of a best possible 99, according to the IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or better.
Verizon stock also holds an IBD Composite Rating of 34 out of a best possible 99. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Verizon stock, meanwhile, has an Accumulation/Distribution Rating of E. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
As of March 20, VZ stock has no valid entry point. It needs to forge a new base.
Investors could take a look at other 5G stocks, such as chip makers or network gear suppliers.
Meanwhile, emerging 5G wireless apps could take years to generate significant revenue. Rather than buy Verizon stock, income-oriented investors might consider a large ETF such as SPY, which tracks the S&P 500.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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