Why Is Verizon’s Stock Up 20% This Year?
Verizon (NYSE:VZ), the largest U.S. wireless carrier, has seen its stock price rise by close to 20% year-to-date, significantly outperforming the S&P 500, which is up by just about 4% in the same period. Below we take a look at some of the possible reasons for Verizon’s outperformance.
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Global Economic Uncertanity Has Investors Shifting Towards Defensive Bets
- With Mid-Band 5G Gaining Momentum, What To Expect From Verizon’s Q1 Results?
- Up 8% Year To Date As 5G Gains Traction, What’s Next For Verizon Stock?
- Up 25% Over The Last Three Months, Will Verizon See Further Gains Following Q4 Results?
- Down 50% From Covid Highs, Will Verizon Stock Recover Post Q3 Results?
- Will Verizon Stock Recover To Its Pre-Inflation Shock Highs?
- Verizon Stock Has Over 60% Upside If It Recovers To Its Pre-Inflation Shock Highs
There have been concerns regarding global economic growth, amid demand concerns in China and the U.K.’s decision to exit the European Union. This has also resulted in the significant strengthening of the U.S. dollar, which has in turn put pressure on many large cap U.S. stocks. In the current environment, many investors seem to be shifting to stocks with stable dividends and cash flows as well as limited overseas exposure. This is likely to be benefiting Verizon, given its large and loyal postpaid phone subscriber base (107 million postpaid users with churn of about 0.96% in Q1) and its U.S.- focused business. Verizon’s rival AT&T, which is also viewed as a defensive bet, has seen its stock price rise by about 23% in the same period.
Verizon’s Pricing Power In A Competitive Market
It’s evident that Verizon doesn’t want to get into the postpaid pricing war that its smaller competitors are engaging in. While Sprint and T-Mobile have cut prices or offered attractive value-added services without raising rates in order to attract customers, Verizon recently hiked pricing on its new postpaid plans by $5-10 per month, while providing higher data capacity and some value-added benefits. This implies that that Verizon is making it clear that its value proposition lies in its superior network quality and coverage as well as its premium branding. Moreover, despite the perceived price war in the industry, Verizon has successfully increased its adjusted EBITDA margins over the last few years. Although this is partly due to a decline in subsidies costs amid a shift to EIP plans, it is still noteworthy.
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