Verizon (VZ) Last Update 10/25/22
Related: CMCSA T DISH
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Verizon
STOCK PRICE
DIVISION
% of STOCK PRICE
Consumer
96.2%
$84.90
Business
3.8%
$3.32
Net Debt
50.5% $44.54
TOTAL
100%
$88.22
$43.68
Yours
Trefis Price
N/A
$39.02
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Verizon Company

VALUATION HIGHLIGHTS

  1. Consumer constitutes 96% of the Trefis price estimate for Verizon's stock.

WHAT HAS CHANGED?

Q3 2022 Performance

Verizon posted a better-than-expected set of Q3 2022 results. While adjusted earnings beat estimates coming in at $1.32 per share, it was down from $1.41 a year ago. Revenue grew by about 4% year-over-year to $34.2 billion, driven partly by the inclusion of Tracfone, which the company acquired last year, although this was partly offset by continued weakness in the consumer wireless business. Verizon lost 189,000 wireless postpaid phone subscribers in its consumer division during the quarter.

5G C-band Spectrum Rollout

Verizon has been building out its 5G network for some time now, with the current focus being on deploying the mid-band C-band spectrum, which can offer average download speeds of 300Mbps. The company is aiming to cover 175 million people with its faster 5G in 2022. Verizon spent roughly $53 billion on this mid-band spectrum in early 2021.

Verizon divests AOL and Yahoo businesses

Verizon has sold off its AOL and Yahoo internet properties to Apollo, a private equity group, as it looks to move away from the media and advertising technology it forayed into back in 2015 while focusing on its core competence as a wireless network operator.

BUSINESS SUMMARY

Verizon makes money primarily through mobile phone subscription plans for consumers and businesses. The company also provides landline phone service to residences, small businesses, and large enterprises. 4G wireless, wireline broadband Internet, and fiber optic TV services (FiOS) are growth areas for Verizon.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Verizon's value that present opportunities for upside or downside to the current Trefis price estimate for Verizon.

Consumer

  • Consumer SG&A as % of Gross Profits: We estimate that this figure will increase from about 32% in 2021 to about 33.5% by the end of our review period, as Verizon may need to increase marketing expenses to compete against rivals such as AT&T, T-Mobile, and Sprint. However, there could be an upside of about 10% to our price estimate if this figure declines to around 30%. On the other hand, if the number rises to over 35% by the end of our review period, there could be a 10% downside to our price estimate.

  • Verizon Retail Wireless ARPU: We expect this figure to increase from current levels of about $45 to about $48 by the end of our review period as more customers opt for the company's 5G services and higher-end plans. If this number comes in at over $55 by the end of our review period, there could be a 10% upside to our price estimate.

For additional details, select a driver above or a division from the interactive Trefis split for Verizon at the top of the page.

SOURCES OF VALUE

The Consumer segment constitutes the majority of Verizon's value due to:

Higher revenue base and thicker margins

Verizon's consumer business accounted for over 76% of the company's revenue in 2021. Gross Margins for the segment are also thicker, standing at about 60% compared to around 50% for the Business segment, due to its higher exposure to wireless revenues. The growth potential for the segment is also higher.

KEY TRENDS

Verizon's big spectrum investments

While Verizon was seen as having the strongest 4G network in the U.S., the company trails T-Mobile, which is perceived to have the strongest 5G network in terms of reach and upload and download speeds due to its rich mid-band spectrum holding, which is considered as the sweet-spot for 5G deployments. However, during the FCC C-Band auction held in 2021, Verizon spent a total of $52.9 billion, including incentive payments and clearing costs, to add an average of 161 MHz of the C-Band nationwide spectrum. This move effectively doubled Verizon's mid-band spectrum holdings. The company is looking to roll out this spectrum to 175 million subscribers by the end of 2022.

Mobile Voice Declines Offset by Data

Mobile phone voice plan pricing has seen a gradual decline as competition has intensified and technology (primarily speed and reliability) and reach have improved. Increasingly, data access is a significant part of usage. So, while average voice revenues have been on a downward trend, the increased data revenue contribution has helped mitigate the impact on total ARPU. Verizon has also been letting go of its feature phone subscribers while focusing on retaining higher-value smartphone users.

Reducing focus on the landline market

Verizon has been stepping back from the declining landline market to focus on the more lucrative wireless business, which is growing faster and is less heavily regulated. The wireless business is also not unionized, unlike the wireline business.