It’s only Day Three, but a new trend is emerging in the tech stock market of 2024 – Verizon. While other tech stocks experienced significant growth in 2023, Verizon’s shares slipped by 4%. However, the tables have turned in early 2024.
While the broader tech market continues to decline, Verizon has already seen a positive increase of over 5% this year. On Thursday morning, the stock rose by 1.4% to $39.72, in contrast to Nasdaq’s 0.1% decrease.
Verizon’s recent success can be attributed, in part, to renewed enthusiasm from Wall Street analysts. They recognize the potential in the stock’s underperformance and undervaluation.
Last week, KeyBanc Capital Markets analyst, Brandon Nispel, upgraded his rating on Verizon shares from Sector Weight to Overweight. He anticipates the company to experience growth this year and believes the stock is currently undervalued based on its forward multiple of Ebitda (earnings before interest, taxes, depreciation, and amortization). Nispel has set a price target of $45 for the stock.
Following suit, Wolfe Research analyst Peter Supino also raised his rating on Verizon shares from Peer Perform to Outperform. He has set a target price of $46. This additional endorsement has further fueled the excitement surrounding Verizon.
As Verizon gains momentum and garners attention from analysts, it is positioned to become one of the hottest tech stocks of 2024. Keep an eye on this promising player in the tech market.
Verizon’s Promising Outlook
In a recent note, industry analyst Supino expressed optimism about the future of Verizon, despite acknowledging the skepticism that some investors may have. While both Verizon and AT&T proved to be disappointing investments five years ago, with losses even after accounting for dividends, Supino believes Verizon can overcome its challenges.
One of the primary concerns surrounding Verizon is the perception that it has lost its network advantage and is currently engaged in a fierce “convergence war” with cable companies. These companies are attempting to gain market share in wireless while also fending off the carriers in broadband. However, Supino remains bullish on Verizon due to what he sees as stable and under-rated industry economics.
Supino cites several factors supporting his positive outlook for Verizon. Firstly, he expects capital spending to decrease, leverage to decline, sales growth to improve, and consensus earnings estimates for the industry to rise. Additionally, he highlights the attractive valuation of Verizon, which is trading at 6.3 times estimated 2024 Ebitda and just 8.9 times expected earnings. According to Supino, this presents an appealing risk/reward proposition for investors.
Furthermore, Supino notes that the completion of the industry’s 5G build-out has resulted in improved balance sheets for telecom companies. The demand for phone upgrades from consumers, coupled with historically low customer churn, has further benefited these companies. Within Verizon specifically, there are positive trends such as an established deleveraging pattern, enhanced execution, and 67% of revenue coming from growth businesses. This includes not only wireless services but also fiber and fixed wireless broadband.
In terms of stock performance, Verizon has been the top-performing telecom stock this year. However, it is important to note that this positive trend is not unique to Verizon alone. AT&T has also experienced a 3% increase this week, while T-Mobile has seen a modest 1% gain.
In conclusion, despite past disappointments, Supino believes that Verizon’s promising prospects, supported by stable industry dynamics and favorable valuations, make it an attractive investment opportunity.