Verizon Stock Rebounds on Q3 Earnings, Analyst Commentary and AT&T Results
Verizon Communications Inc (VZ) stock staged a comeback on Wednesday, rebounding from a selloff that followed the release of its third-quarter earnings report on Tuesday. The positive momentum was further fueled by encouraging quarterly results from AT&T Inc (T).
Verizon’s sales growth for the quarter remained flat year-over-year, reaching $33.33 billion. This slightly missed the analyst estimate of $33.43 billion. The company attributed the flat growth to declines in wireless equipment revenue, which offset the growth in its service and other revenue streams.
Despite the mixed earnings report, analysts remain positive on Verizon’s future prospects. Several analysts reiterated their ratings on the stock following the release of the earnings report.
BofA Securities analyst David W. Barden maintained a Neutral rating with a price target of $45. RBC Capital analyst Jonathan Atkin maintained a Sector Perform rating with a price target of $46. Scotiabank analyst Maher Yaghi reiterated a Sector Perform rating with a price target of $47.00, down from $47.25.
Analysts’ Views on Verizon’s Future
BofA Securities: Barden believes Verizon’s solid third-quarter results position the company to meet or exceed the midpoint of its service revenue and adjusted EBITDA growth guidance, despite the recent share decline. Investors’ concerns seem to stem from Verizon’s 2025 capital expenditure guidance of $17.5 billion-$18.5 billion, which suggests potential challenges in free cash flow. Barden emphasizes that Verizon’s recent strategic discussions highlight priorities such as fixed wireless access (FWA), fiber to the home (FTTH), convergence, and capital allocation.
Verizon’s increased FWA subscriber target to 8-9 million by 2028 is driven by C-band deployment in suburban and rural areas and the use of mmWave spectrum to target multi-tenant dwellings. The company aims to expand its fiber reach to 30 million homes by 2028, including Frontier’s current passings, and eventually grow this to 35-40 million. Verizon believes that consumer-led convergence can drive revenue and margin growth through reduced churn and cross-selling opportunities. The company also outlines its capital allocation priorities, focusing on investment in the business, dividend growth, and balance sheet improvement. Verizon has increased its leverage target to 2-2.25 times and will consider buybacks at or below this level. Barden highlights Verizon’s premium network as a key asset, enabling the company to build a premium-value subscriber base. He believes Verizon’s long-term strategy is to utilize its network as a service model, laying the foundation for the emerging 5G economy. However, in the near term, Verizon faces competitive pressure that may lead to increased promotional spending and margin impacts as it awaits the 5G economy’s takeoff.
RBC Capital: Atkin highlights that Verizon’s third-quarter revenue reached $33.3 billion, a flat year-over-year performance and slightly below expectations due to weaker wireless equipment sales caused by fewer handset upgrades. Adjusted EBITDA climbed 2.1% year-over-year to $12.5 billion, surpassing estimates by 0.6%, while adjusted EPS of $1.19 came in slightly ahead of expectations. Free cash flow was $6.0 billion, exceeding expectations due to the timing of capital expenditures, while operating cash flow was impacted by cash taxes and non-recurring charges. Capital expenditures for the quarter were $3.9 billion, lower than anticipated. The analyst believes that Verizon’s network position and strong dividend yield are positives, but potential increasing competitive intensity in the wireless business remains a concern. Atkin highlights that the company’s underlying wireless subscriber momentum and service revenue trajectory are improving and should benefit further from differentiated promotions. However, potential for expanded promotional activity among carriers and cable Mobile Virtual Network Operators (MVNOs) as they compete for market share in a saturated market, and the associated impact on wireless margins, along with the company’s reliance on wireless service revenue growth through price increases, keeps Atkin on the sidelines.
Scotiabank: Yaghi notes that Verizon’s third-quarter results aligned with his expectations and the consensus. Total revenue reached $33.3 billion, flat year-over-year, compared to the analyst’s estimate of $33.6 billion and the consensus of $33.4 billion. Lower handset upgrades put pressure on wireless equipment revenues and offset wireless service revenue growth. Adjusted EBITDA came in at $12.5 billion, in line with his and consensus estimates of $12.4 billion. Growth was supported by wireless gains and lower handset upgrade rates, as the new iPhone has not yet led to a significant increase in upgrades. While consumer postpaid phone net adds turned positive at +81K (~60K from second lines), management needs to demonstrate sustained recovery over the next few quarters, especially without the boost from second lines seen in the second and third quarters. The increase in fiscal 2025 capex guidance by $750 million was a surprise, indicating that free cash flow (FCF), while healthy, may not see growth next year. Yaghi acknowledges Verizon’s past investments provide the company with opportunities to improve growth, including its 5G services, C-band acquisition and deployment, TracFone acquisition, wholesale MVNO access, etc. The analyst believes Verizon’s nationwide broadband coverage is still in its early stages. FTTH coverage is extensive enough to offset non-Fios losses to cable, according to the analyst. However, the integration of TracFone is causing leakage on the prepaid side for a few more quarters, and, combined with a weaker positioning in consumer postpaid offerings due to Verizon’s decision not to heavily subsidize handsets, is putting pressure on the company’s revenue outlook.
Verizon’s Stock Performance
VZ stock was up 2.66% at $42.61 at the last check on Wednesday. The rebound indicates investor confidence in the company’s long-term growth potential, supported by its strong network position and strategic investments in key growth areas like FWA and FTTH.
