9. INDUSTRY, INNOVATION, AND INFRASTRUCTURE

Wells Fargo cuts Verizon stock target on consumer sub trends By Investing.com

Written by Amanda

On Tuesday, Wells Fargo made adjustments to its outlook on Verizon Communications (NYSE:), reducing the telecom giant’s price target from $44.00 to $40.00. The firm maintained its Equal Weight rating on the stock. The adjustment follows Verizon’s report of consumer postpaid phone losses, which were less severe than Wells Fargo had anticipated.

Verizon’s reported loss of 158,000 consumer postpaid phone subscribers in the recent quarter was an improvement over Wells Fargo’s estimate of a loss of 205,000. However, this figure includes an estimated 20,000 to 35,000 subscribers gained from a new $10 per line “second number” service introduced in March. Without this boost, the losses might have ranged between 180,000 and 200,000.

The market’s reaction was mixed, as some investors had hoped for an announcement of positive consumer phone additions in the second quarter, considering the new “second number” service’s influence.

Nonetheless, Wells Fargo has revised its second-quarter forecast for Verizon’s consumer postpaid phone additions from a loss of 75,000 to a gain of 15,000. This revision is underpinned by an uptick in phone gross additions at the close of the first quarter, negligible churn due to price increases, and the anticipated ongoing contributions from the “second line” service.

The “second lines” are noted to dilute the average revenue per user (ARPU) but are beneficial to margins and the average revenue per account (ARPA). These lines are expected to modestly boost phone additions throughout the remaining months of the year.

Wells Fargo’s revised price target reflects the latest subscriber trends and the potential impacts of Verizon’s strategic offerings on its financial performance. The firm’s analysis indicates that while the “second number” initiative is helping to mitigate subscriber losses, it also brings with it a trade-off in terms of revenue per user.

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InvestingPro Insights

As Verizon Communications (NYSE:VZ) navigates the competitive telecom landscape, recent data from InvestingPro reveals key financial metrics that may interest investors. The company’s market capitalization stands at $162.88 billion, with a Price/Earnings (P/E) ratio of 9.22 based on the last twelve months as of Q4 2023. This relatively low P/E ratio might suggest that the stock is undervalued compared to its earnings. Additionally, the dividend yield as of April 2024 is an attractive 6.89%, which aligns with Verizon’s reputation of paying a significant dividend to shareholders, having maintained dividend payments for 41 consecutive years.

InvestingPro Tips highlight Verizon as a prominent player in the Diversified Telecommunication Services industry, known for its low price volatility. Despite analysts revising their earnings downwards for the upcoming period, the company has been profitable over the last twelve months and is predicted to remain profitable this year. For investors seeking more in-depth analysis and additional tips, there are 5 more InvestingPro Tips available at InvestingPro. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights into Verizon’s performance and potential investment opportunities.

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Source: investing.com

About the author

Amanda

Hi there, I am Amanda and I work as an editor at impactinvesting.ai;  if you are interested in my services, please reach me at amanda.impactinvesting.ai