Verizon’s [VZ] share price got an unexpected assist last week thanks to Apple [AAPL]. Making a surprise appearance at Apple’s big iPhone launch, Verizon CEO Hans Vestberg announced the telecoms giant would be initiating US-wide 5G coverage. That announcement made telecom investors sit up and take notice, with Verizon’s share price shooting up in intraday trading following the announcement.
Those gains were short-lived, and not enough to see the stock end up on the day, but a welcome relief from the inertia that has surrounded Verizon's share price recently. Since the start of August, Verizon’s share price has been trapped between $58 and $60 while the company keeps performing well — Verizon saw earnings of $1.13 a share last quarter, up from the $0.95 seen in the same period last year.
In upcoming earnings, progress on the company’s 5G rollout will be closely watched, with shareholders hoping that anything positive in this area will help Verizon’s share price to finally break out.
When is Verizon announcing earnings?
Why investors should take note
Verizon 5G goes nationwide
Verizon is playing catch-up with its rivals T-Mobile [TMUS] and AT&T [T], both of whom have already rolled out various tiers of 5G coverage. Previously, it had only offered its ultra-fast 5G service in a small number of cities, but now customers can access a slower, easier to deliver low-band 5G service in more places.
News of the mobile carrier finally making this change has no doubt helped investor confidence, along with the company being the first to offer Apple’s 5G iPhones. This confidence has yet to translate into gains on Verizon’s share price, however. Investors will be looking for an update on Verizon’s 5G strategy and how it will help it get the jump on its rivals.
Benefitting from video conferencing trend
Data usage has grown during lockdown, with Verizon carrying 800 million calls daily in May, according to the Financial Times. These calls are lasting for longer, with more people spending time away from loved ones and working from home. This latter behavioural change has also seen an increase in video conference calls over devices.
calls carried daily by Verizon in May 2020
Vestberg has long been an advocate for combining video technology and telecoms. This vision prompted Verizon to purchase video conferencing tool Blue Jeans in May, in a deal CNBC estimates is worth around $400m.
Blue Jeans has around 15,000 business customers and competes directly with the likes of Zoom, Cisco's WebEx and Microsoft Teams. That is some stiff competition, especially with Zoom's share price seeing triple-digit gains this year.
“We feel really good about our assets,” Vestberg told CNBC.“I feel that we are in a very very good spot with 5G.”
Investors should get a sense of how good a buy it really was during the upcoming results.
“We feel really good about our assets. I feel that we are in a very very good spot with 5G.” - Hans Vestberg, Verizon CEO
What is Wall Street expecting for Verizon’s share price?
Wall Street is expecting earnings to come in at $1.22 a share, down from the $1.25 seen in the same period last year. Revenue is pegged at $31.59bn, a 4% decrease from the $32.89bn last year. Income seekers should also watch out for any news on the dividend accompanying Verizon’s share price, which carries a decent 4.32% forward yield.
The cost of Vestberg’s 5G vision is likely to be one of the culprits for weakened earnings. In the quarter, Verizon spent $1.9bn to secure a spectrum that’s valuable for 5G from the Federal Communications Commission. While this unlocks Verizon’s plans for nationwide 5G coverage, the impact will be felt on earnings.
In September, Argus Research upgraded the stock to a Buy, with a $68 target on Verizon’s share price. In the same month, Timothy Horan from Oppenheimer has a $70 price target on the stock, believing the business still has room to grow.
Among the analysts tracking the stock on Yahoo Finance, Verizon’s share price carries a $61.26 average price target. Hitting this would see a 6.9% upside on its 19 October close.
Of the 32 analysts offering recommendations, 24 rate it a Hold.
|PE ratio (TTM)||12.32%|
|Quarterly revenue growth||-5.10%|
Verizon share price vitals, Yahoo Finance, 20 October 2020