Despite Mixed Earnings Results, Verizon Still a Buy, Says 5-Star Analyst


Whether you are a mega-cap or small fry, COVID-19 doesn’t care. Verizon (VZ), the US’s largest wireless carrier, reported earnings last Friday, with mixed results on account of the pandemic’s impact.

Revenue fell 1.6% year-over-year to $31.6 billion, although Q1 Non-GAAP EPS of $1.26 beat estimates by $0.04.

With 70% of its stores shut down resulting in weak customer activity, equipment sales were down by 19% year-over-year. Verizon also lost 68,000 postpaid phone subscribers during the first quarter, compared to 44,000 in last year’s same period.

The decline in consumers was partly offset by adding new business customers. But the stagnant economy, growing unemployment figures and shelter in place measures, along with the sharp reduction in new consumer wireless accounts, were cited by the company as the reasons behind taking its full-year revenue guidance off the table and modifying profit outlook for the rest of the year. The company forecasts full-year adjusted earnings-per-share growth to come in between -2% to 2%. The previous forecast called for EPS growth of 2% to 4%.

Fortunately for Verizon, it has enough liquidity to see it through these difficult times, with $7 Billion in cash (up from $2.6 billion in 4Q19) and $9.5 billion in untapped revolving credit facility to help with paying $3 billion in upcoming maturities.

Despite expecting “weakness to continue through year-end,” Oppenheimer’s Timothy Horan sees better days ahead for the communications giant.

The 5-star analyst said, “Verizon reported slightly weaker results, and guidance is weak, and may not be conservative enough. However, financial results should be better than the overall market/economy on “sticky” critical communications services revenue. We think the company remains focused on aggressively building out its 5G network and addressing a surge in network traffic, signaled by a 24% Y/Y increase in CAPX.”

Horan keeps an Outperform rating along with a $70 price target. Should the analyst’s thesis play out in the next 12 months, 20% upside could be in the cards. (To watch Horan’s track record, click here)

Overall, Wall Street is not as bullish on VZ as Horan, but is not throwing the towel, either. The telecom giant holds a Moderate Buy from the analyst consensus, based on 6 “buy” ratings – but also 11 “holds.” Shares sell for $58.12, and the $60.38 average price target suggests a modest 4% upside. (See Verizon stock analysis on TipRanks)

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