Verizon Communications Inc.

VZ Details

Verizon Communications Inc. (NYSE: VZ) is a communications, information, and entertainment firm that manufactures and sells goods and services. It has two operating segments: 1) Verizon Consumer Group, which provides cellular and landline communications services to individual customers, and 2) Verizon Business Group, which provides wireless services such as data, video, and conferencing, corporate networking solutions, security and managed network services, local and long-distance phone services, and others to business and government customers and wireline carriers.

Latest News:

• Collaboration with Oracle: Verizon and Oracle announced a collaboration on April 26, 2022, to explore how Verizon 5G Ultra-Wideband might revolutionize industries, including utilities, manufacturing, communications, construction, and engineering. Partners and clients can now explore, create, and test 5G use cases that make possibilities and address their most pressing industry concerns at the Oracle Industry Lab outside of Chicago, powered by Verizon 5G Ultra-Wideband. The issues range from Carbon reduction, worker safety, sustainable building, and others.

Q1FY22 Results:

• Slight Growth in Topline: The company reported YoY growth of 2.09% in revenues to USD 33.55 billion during Q1FY22 (ended March 31, 2022) from USD 32.87 billion during Q1FY21, attributable to growth in wireless equipment revenues.
• Contraction of Net Income: The company's net income decreased to USD 4.71 billion in Q1FY22 from USD 5.38 billion in Q1FY21.
• Cash and Debt Position: As of March 31, 2022, the company had cash and cash equivalents of USD 1.66 billion and total debt of USD 153.38 billion.

Key Risk:

• Vendor Concentration Risk: VZ's essential equipment requirements are met by a limited number of manufacturers and providers. Furthermore, the chipset utilized in manufacturing its smartphone and other devices is supplied by a single manufacturer. As a result, any breach of contract by these third parties could jeopardize the company's operations.

Outlook:

2022 Guidance (Source: Q1FY22 Earnings Presentation, April 22, 2022)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

VZ' stock price has fallen 13.54% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 48.42 to USD 59.85. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 59.58.

Considering the correction in the stock price, solid margins, recent collaborations, current valuation, and associated risks. We recommend a "Buy" rating on the stock at the closing price of USD 48.40, down 0.12% as of April 28, 2022.

Three-Year Technical Price Chart (April 28, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.

Disclaimer

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