Verizon Communications Inc. (NYSE: VZ) stock took a dip after the company announced its Q4 2019 results on January 30, 2020. Trading at $59.36 on the day of results, the stock took a sharp dip on February 3 after the Credit Suisse downgrade. The prices took another steep turn to close at $60.24 on Monday, February 7.
What makes Verizon tick?
Verizon’s strength in the last quarter of 2019 was its strong revenue growth. The firm’s revenue was $34.78 billion marking a 1.5% year-on-year growth and beating analyst expectations by $160 million. Its non-GAAP (generally accepted accounting principles) EPS (Earnings per Share) was $1.13 while GAAP EPS was $1.23, only slightly diverging from estimates.
Analysts have given the stock an ‘OVERWEIGHT’ rating, expecting $1.23 in EPS in the current quarter and $1.25 in the upcoming quarter. EPS expectations for the current fiscal are $4.95.
While announcing a ratings downgrade from ‘OUTPERFORM’ to ‘NEUTRAL’, Credit Suisse analyst Douglas Mitchelson said that the company has a bright long-term picture but it has a lot to prove in the near-term.
With 5G implementations resulting in higher expenses, the company is still a good stock with a target price of $65. It may, however, need a strong positive catalyst in the near run to boost slowing growth.
Both HSBC Securities and Deutsche Bank maintain their ‘HOLD’ rating for Verizon.
What to watch out for?
Verizon’s customer numbers increased in Q4 thanks to its cheaper plans and integration with Disney+ streaming service. This number is yet to result in increased earnings. The company has to invest billions of dollars in its 5G infrastructure, which may receive stiff competition from T-Mobile- Sprint partnership.
Their dividend yield has dipped 4% but Verizon remains a strong market leader in the telecom sector with robust expectations for the upcoming fiscal.