Verizon jumps as KeyBanc lifts rating, sees market share gains over AT&T

Verizon  (VZ) – Get Free Report jumped Wednesday after analysts at KeyBanc Capital Markets boosted their rating on the stock, citing the group’s potential to build on its broadband and wireless subscriber growth. 

KeyBanc analyst Brandon Nispel lifted his rating on Verizon to overweight from sector weight, with a new price target of $45 a share.

He said that the group was outpacing rival AT&T  (T) – Get Free Report on broadband growth and that wireless-subscriber additions should improve in the coming year thanks to what he called a “healthier lack of incremental device promotions.”

Verizon has lost market share to rivals over the past five years, with its overall take declining from around 41% in 2019 to around 36% last year, Nispel argues. While that trend is likely to continue, he said, its share of gains will likely improve. 

“Postpaid phone subscriber growth should continue [at an above-average] pace for the industry, and churn should remain stable,” Nispel wrote, using the industry term for subscribers switching to other carriers. 

“Wireless carriers appear complacent with their performance, and no one wants to ‘rock the boat,’ which makes us want mor (sector) exposure.”

“Further, we expect to see Verizon’s postpaid phone net [additions] improve year-on-year in every quarter in 2024, which compares to our expectations for year-on-year deceleration in postpaid phone net adds for T-Mobile U.S.  (TMUS) – Get Free Report and AT&T,” he added.

Verizon shares were marked 1.7% higher in pre-market trading, with more than 2 million shares changing hands, to indicate an opening bell price of $39.53 each.

Verizon estimated stronger cash flow

In October Verizon boosted its full-year cash flow forecast by around $1 billion, to $18 billion, after adding around 100,000 new bill-paying customers to its more expensive wireless plan over the third quarter.

Non-GAAP earnings for the three months ended in October were pegged at $1.22 a share, topping Wall Street forecasts, while overall revenue slipped 2.6% from a year earlier to $33.3 billion.

The group named Tony Skiadas as full-time chief financial officer in November. The company veteran is “uniquely positioned to steer us through the current economic volatility and our industry’s changing landscape,” Chief Executive Hans Vestberg had said in a statement.

Verizon’s ongoing deployment of its 5G network, built in part on the $53 billion purchase of new C-Band spectrum from the U.S. government, remains a key plank in the group’s growth prospects 

“We expect Verizon’s consumer broadband business to achieve 1.16 million net adds in 2023 and 1.03 million in 2024,” Nispel said, compared with losses of 170,000 and 96,000 respectively for AT&T. 

“We expect VZ to outperform T given VZ’s growing FiOS (fiber) and 5G Home (FWA) service, and relatively smaller amount of nonfiber (DSL and other) customers,” Nispel added.

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