Mobile Investing Trading
5G Growth Forecast for Verizon AT&T TMobile Sprint
December 03 2019 - Is Verizon Stock A Buy? 5G Wireless Could Shake Up Growth Outlook By Investors Business Daily
Verizon stock often attracts income-oriented investors. If Verizon 5G wireless services reignite earnings and revenue growth, however, its shares might have much greater appeal.
Verizon Communications (VZ) and telecom rival AT&T (T) are viewed as defensive plays because of high dividends. Verizon stock pays a 4.1% dividend.
Amid stock market volatility and talk of negative interest rates reaching the U.S., Verizon climbed above its 50-day moving average in early September. However, Verizon stock has stayed in consolidation mode. VZ stock was unable to break out after it reported third-quarter earnings in October and hosted a sell-side analyst day in mid-November.
Thanks to low interest rates, Verizon has posted some good runs since the global recession of 2008-2009. The telecom giant at one point jumped into the IBD Leaderboard of top growth stocks.
Even so, Verizon stock has consistently underperformed the S&P 500 and has yet to surpass the high it reached in 1999 — not the mark of a growth stock.
Could that change? The Trump administration expects an economic boom from 5G wireless services. It's making more spectrum available for 5G wireless.
Verizon has been aggressive in building out 5G wireless infrastructure. The company's 5G buildout could reignite currently anemic earnings and revenue growth, say Verizon stock bulls.
Verizon Stock Fundamentals
Verizon is the largest provider of wireless services in the U.S. It also sells wired services to consumers in the Northeast and business services globally.
Verizon is much more exposed to the U.S. wireless market than rival telecom firm AT&T. Verizon gets nearly 85% of adjusted earnings from its wireless business.
The company has paid down debt since it bought Vodafone Group's (VOD) 45% stake in a wireless joint venture for $130 billion in early 2014. One Verizon stock catalyst could be the return of a share buyback program. First, its credit rating needs to improve.
Further, its senior leadership is new. Chief Executive Hans Vestberg served as network gear maker Ericsson's (ERICY) CEO before joining Verizon. Vestberg and Chief Strategy Officer Rima Qureshi, also an Ericsson veteran, both joined Verizon in 2017.
Ronan Dunne, head of Verizon's consumer business, previously was CEO at British wireless firm O2. He joined Verizon in 2016.
Starting with results for the June 2019 quarter, Verizon reported results under consumer and business segments rather than its historical wireless and wireline units.
Verizon Earnings Growth Lacking Minus Tax Boost
Verizon's foray into the media business through the AOL and Yahoo acquisitions misfired. In December, it took a $4.6 billion write-down on its media business, called Oath.
Meanwhile, Vestberg has embarked on a four-year, $10 billion cost-cutting effort.
Verizon earnings in 2018 jumped nearly 26% as the Trump administration's corporate tax cuts and new accounting rules boosted profits. But in 2019, earnings are expected to rise just 1% to $4.74 per share. Next year, earnings will rise 2% a share, analysts estimate.
Revenue growth also is anemic. Verizon's top line is projected to grow 1% to $131 billion in 2019. Revenue will grow 1% again next year, analysts estimate.
Verizon's problem is that the U.S. wireless market is saturated. Most consumers have unlimited data plans. They're upgrading smartphones at a slow rate. Plus, data-gobbling mobile video hasn't panned out as a big moneymaker.
That's why Verizon 5G growth is key. Pundits expect 5G wireless to have a role in manufacturing automation, cloud gaming, autonomous vehicles, drones and remote health care services.
Verizon Stock Catalysts: Verizon 5G To The Rescue?
Dividends matter. Falling S&P 500 earnings estimates for next year, along with lower interest rates, could set up telecom stocks Verizon and AT&T for a rebound in the back half of 2019.
But fundamental growth would remain an issue.
Verizon has been testing 5G broadband service to homes in four cities — Houston, Indianapolis, Los Angeles and Sacramento. However, Verizon does not expect meaningful revenue from 5G wireless broadband services to homes until 2021.
The company's fixed 5G services use high-frequency radio spectrum. It's expected to buy more airwaves for 5G. That could delay a stock buyback.
Verizon plans to build out 5G mobile services in 30 U.S. cities in 2019. Mobile 5G is expected to whisk video to smartphones at least 10 times faster than current networks. Some studies say, however, that consumers could resist higher 5G fees. T-Mobile US (TMUS) on Dec. 2 launched 5G services without hiking prices.
A big test for consumer demand of 5G mobile services could come in September 2020 when Apple (AAPL) rolls out new iPhones.
Verizon aims to operate the best 5G wireless network.
Verizon has told analysts that it expects 5G fixed broadband revenue to become significant in 2021, with 5G business services picking up in 2022.
Still, emerging 5G wireless apps, such as drones or remote medicine — remotely controlled medical treatments — could take years to develop.
Verizon Analysis: Is It A Buy Right Now?
Verizon stock continues to trade below an entry point of 61.68. Near-term catalysts are unclear.
Verizon's third-quarter earnings and revenue topped estimates as its wireless business added 444,000 postpaid wireless phone subscribers vs. analyst estimates for 295,000. The wireless giant lowered pricing for unlimited data plans in the quarter.
Some analysts expect Verizon to report strong December quarter additions because of a video streaming promotion with Walt Disney (DIS).
While telecom rival AT&T also offers a sizable dividend, Verizon could be the better run company.
Verizon has avoided large-scale acquisitions, unlike AT&T. Activist investor Elliott Management has criticized AT&T, a large-cap stock, as an underperformer.
There are other factors to consider. The Department of Justice has greenlighted the proposed T-Mobile merger with Sprint (S). The DOJ gave its blessing after T-Mobile forged a side deal with Dish Network (DISH).
However, a group of states has sued to block the merger. A federal court is set to hear the case starting Dec. 9.
Verizon stock has a Relative Strength Rating of 53 out of a possible 99, down from 70 six weeks ago, according to IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or better.
For technical reasons, Verizon stock is not a buy.
Rather than buy Verizon stock, income-oriented investors might consider a large ETF such as SPY, which tracks the S&P 500.
Invest2Success Investment Advisory Stock Picks
Free Trial - Receive daily low-risk high-reward SP500 NYSE Nasdaq buy-long and short-sell stock picks that are experiencing strong increasing and decreasing earnings, that include buy sell entry, stop-loss, take profit area price targets, and trade management information to your email inbox.
MotiveWave Trading Software Free Trial
Free Elliott Wave Training with a Purchase of the TracknTrade or MotiveWave Trading Software