Here’s Why Verizon Stock Might Not Rise Much From Here

by Trefis Team
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Verizon stock (NYSE: VZ) saw a 5.4% increase in the last one month (21 trading days) and it now trades at $59 per share. This rise in the stock was driven by recovery in the company’s business from the pandemic impact, which was reflected in 2.2% growth in its wireless service revenue in 2020, which is the largest revenue segment for Verizon (contributing $16.7 billion to total revenue of $34.7 billion in Q4 2020). Wireless service revenue is expected to grow another 3% in 2021 led by higher-priced unlimited plans. The company’s plan to add homes and businesses at a faster rate to its 5G network in the coming quarters is likely to fuel healthy growth in the wireless service business. Verizon expects to provide 5G service to 15 million homes in the U.S. by end of 2021. Thus, anticipation of faster 5G expansion and growth in wireless business has led to an uptick in the stock in the last month.

That is on a standalone basis. But, Verizon is still far behind its close rivals in adding new postpaid phone customers (most valuable for a telecom company). To put things in perspective, Verizon added 279,000 new postpaid phone customers in Q4 2020, much lower than AT&T’s 800,000 and T-Mobile’s 824,000. With Verizon lagging its close rivals, will VZ stock continue to register healthy returns or see some correction in the next few months? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for VZ stock average close to1.1% in the next three-month (63 trading days) period after experiencing a 5.4% rise over the previous one-month (21 trading days) period. Notably, though, the stock is likely to underperform the S&P500 over the next three months, with an expected return which would be 5% lower compared to the S&P500.

But how would these numbers change if you are interested in holding VZ stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test VZ stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF VZ stock moved by -5% over five trading days, THEN over the next 21 trading days, VZ stock moves an average of 3.5 percent, which implies a return which is almost in line with that of the S&P500.

More importantly, there is 73% probability of a positive return over the next 21 trading days and 51% probability of a positive excess return after a -5% change over five trading days.

Some Fun Scenarios, FAQs & Making Sense of VZ Stock Movements:

Question 1: Is the average return for Verizon stock higher after a drop?

Answer:

Consider two situations,

Case 1: Verizon stock drops by -5% or more in a week

Case 2: Verizon stock rises by 5% or more in a week

Is the average return for Verizon stock higher over the subsequent month after Case 1 or Case 2?

VZ stock fares better after Case 1, with an average return of 3.5% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.4% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Verizon stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Verizon stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For VZ stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is generally lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

VZ’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Verizon stock by changing the inputs in the charts above.

5G wireless technology is a hot trend. Which stocks should you pick? Check out our theme on 5G Stocks for details.

 

See all Trefis Price Estimates and Download Trefis Data here

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