Verizon Communications Inc. (VZ) has faced challenges over the past year, but recent results suggest potential for recovery and growth. The company, with a market capitalization of $166.2 billion, is recognized as one of the leading players in the communications sector, offering services from wireless to broadband and wireline solutions across two primary segments: the Verizon Consumer Group and the Verizon Business Group.
Despite these strengths, Verizon's stock has underperformed compared to broader market indices. Over the past year, VZ shares have declined by 7.1%, starkly contrasting with the S&P 500 Index, which surged by 23.3%. Year-to-date, VZ is down 1.3%, lagging behind the Communication Services Select Sector SPDR ETF Fund's impressive 31.1% gain.
On January 24, 2025, Verizon reported its fourth-quarter earnings, which revealed some encouraging signs. The company posted adjusted earnings per share (EPS) of $1.10 and revenue of $35.7 billion, exceeding analyst expectations. Notably, Verizon saw substantial net additions of 1.41 million postpaid customers and 408,000 broadband additions, showcasing positive customer engagement.
Contributing to this turnaround was Verizon's net income of $5.1 billion, which marked a significant recovery from losses posted the previous year. The company benefited from pre-tax gains from special items, enhancing its overall financial health. "The guidance for 2025, including expectations for wireless service revenue growth and adjusted EBITDA increases, has helped boosts investor confidence," explained financial analyst commentary surrounding the earnings report.
Verizon's performance has made analysts optimistic about its outlook. Projections for the current fiscal year ending December 2025 forecast EPS growth of 2.2% year-over-year to $4.69. Analysts have also noted Verizon's consistent ability to exceed consensus earnings estimates over the last four quarters, which has contributed to its positive rating trend.
Among the 25 analysts covering VZ, the consensus rating is categorized as a "Moderate Buy," with nine expressing strong buy sentiments, two moderate buys, and 14 holds. Notably, this distribution indicates increased confidence compared to previous months when there were only seven strong buy ratings.
On January 28, 2025, Evercore ISI raised its price target for VZ to $44, maintaining an "Underperform" rating. Their rationale stemmed from strong subscriber growth and optimistic financial predictions heading toward 2025. Despite this cautious stance, the firm's outlook remains more bullish compared to earlier assessments, signaling significant potential for growth.
Currently, VZ is trading below the analysts' collective mean price target of $46.49, with the highest target set at $55. This suggests potential upside of up to 39.3%, indicating room for significant recovery.
Morningstar's evaluation of Verizon's fourth-quarter results indicates modest growth overall. They report wireless service revenue increased by 3.1% year-over-year. Though postpaid net additions slightly improved, the firm acknowledges continued challenges from rival carriers who are vigorously contesting market share.
Morningstar's fair value estimate for Verizon is set at $53.00, reflecting their assessment of the company's market position. The firm rates Verizon with four stars, indicating their belief it is undervalued compared to its long-term fair value metrics. "With Verizon trading more than 20% under our fair value estimate, the stock appears attractive compared to peers," noted Morningstar's analysts.
Despite the optimism, Verizon does face competition-induced pressures. The company concedes to ceding significant market growth to rivals such as T-Mobile and AT&T, which have aggressively pursued customer acquisition. For example, postpaid phone net additions are projected to be less than competitive figures, as the analysts suggest rivals added over 2 million customers during the past period.
The favorable conditions for the U.S. wireless industry contribute to Verizon's comparatively strong position, with the company claiming over 90% of retail postpaid phone clientele alongside its major market competitors. Insights suggest steady revenue growth per postpaid customer is expected, driven primarily by pricing stability rather than exponential market expansion.
Despite these competitive hurdles, Verizon has made strides with its operational approach. The recent growth figures are bolstered by effective pricing strategies, leading to revenue per consumer postpaid account casually improving by 4% year-over-year to $140.
Further accumulating evidence of Verizon's overall strengths is its financial footing. Although the company took on significant debt for strategic acquisitions—more than $65 billion to purchase Vodafone's stake—its management remains focused on reducing leverage and strengthening cash flows.
Verizon is aware of potential regulatory and technological disruptions on the horizon. Recent concerns surrounding outdated lead-sheathed cables within telecom networks have raised eyebrows among analysts and regulators. If these cables are deemed hazardous, it could spark significant financial liabilities.
There is also the debate surrounding the sustainability of Verizon’s network position. While optimists praise the extensive coverage and reliability of the Verizon wireless network, pessimists worry about the fast-evolving competition. "The wireless technology revolution has made it increasingly affordable for rivals to expand their own infrastructures, leaving Verizon's prior market leadership vulnerable," explained analysts familiar with the sector.
Verizon's stock performance moving forward hinges largely on its ability to maintain pricing structures and growth momentum against fierce market competition. The recent fourth-quarter results establish grounds for cautious optimism, yet the next year remains dynamic and uncertain for this telecommunications giant.