Can Verizon (VZ) Ride on Multi-Year Network Upgrade Plans?
Verizon Communications Inc. VZ is undergoing a multi-year transformation to upgrade its network infrastructure in tune with the evolving customer demands to better serve the end users. The improved network capabilities have proven to be a boon for customers, creating a scalable platform to manage the exponential growth in data usage with higher network efficiency and enhanced security. This, in turn, has enabled the company to fuel its long-term growth engine, with revenues witnessing a CAGR of 3.3% since 2020.
The most notable achievement by Verizon has been the deployment of the superfast 5G network across the country, with the service currently enjoyed by about 230 million of its subscribers. Verizon’s 5G mobility service offers an unparalleled experience that impacts industries as diverse as public safety, health care, retail and sports. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These are massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.
In addition, the company has covered more than 40 million households with 5G Fixed Wireless Access Internet facility. The continued build-out of OneFiber and C-Band spectrum expansion has further expanded the reach and capacity of its 5G Ultra Wideband network. Verizon has also deployed nearly 57,000 fiber miles since 2020, connecting more than half of its cell sites with its own fiber. It is also offering the best of LTE and 5G Ultrawideband facilities with On Site 5G — a transformative on-premises, private 5G network — for business enterprises. This customized solution enables firms hitherto crippled with coverage gaps, lost connectivity, fractured security, data congestion and inconsistent service quality to have a dedicated capacity with adequate bandwidth to minimize costly downtime and missed opportunities.
With about 68% of Verizon customers possessing 5G-capable smartphones, there is an increasing propensity to consume more 5G traffic, consequently freeing up capacity on the 4G network. This has improved the overall customer experience, with 5G customers enjoying superfast 5G network speed and 4G customers benefiting from improved performance from the shift in traffic.
Verizon is building the entire network infrastructure and ecosystem to provide the most amazing 5G experience to customers. The company is likely to benefit from a disciplined network upgrade strategy backed by a customer-centric business model and diligent execution of operational plans. With the ramp-up of 5G service across the country, Verizon is expected to retain its lead in promulgating 5G mobile networks nationwide by using virtualized machines, advanced levels of operational automation and adaptability.
Moreover, Verizon is offering various mix-and-match pricing in wireless and home broadband plans, which has led to solid customer additions with increased adoption of 5G devices and premium unlimited plans. In the enterprise and wholesale business, it is changing its revenue mix toward newer growth services like cloud, security and professional services.
The company has further expanded Fios Forward to support digital inclusion and provide opportunities for underserved households to thrive in the digital world. With no data caps, Fios customers can experience faster upload and download than comparable plans. The company’s focus on online content delivery, mobile video and online advertising should drive growth.
The stock has lost 16.2% in the past year compared with the industry’s decline of 7.1%.
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Verizon presently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Picks
Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 18.7% and delivered an earnings surprise of 12.8%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
AudioCodes Ltd. AUDC is a Zacks Rank #2 stock. It has a long-term earnings growth expectation of 4.3% and delivered an earnings surprise of 2.2%, on average, in the trailing four quarters.
Headquartered in Lod, Israel, AudioCodes offers advanced communications software, products, and productivity solutions for the digital workplace. It provides a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.
Motorola Solutions, Inc. MSI, carrying a Zacks Rank #2, delivered an earnings surprise of 5.62%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 5.58%.
Motorola provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers. It develops and services both analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets.
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