Verizon Communications Inc. VZ recently activated more than 740 new Fixed Wireless Access (FWA) lines with the Tri-County Metropolitan Transportation District of Oregon (TriMet) to improve the mass transportation capabilities in the Portland metropolitan region. The superior bandwidth of FWA will help the transit agency with state-of-the-art connectivity and on-the-go traffic updates for enhanced bus, light rail, commuter rail and paratransit service in the region.
With fast, reliable and scalable wireless network connectivity leveraging Verizon’s 5G, FWA enables TriMet commuters to pay fares using their mobile wallet or contactless payment card. Moreover, the multimodal transportation service provider is pioneering a cloud-based Transit Signal Priority system that improves traffic flow efficiency without compromising on passenger safety while reducing carbon emissions.
VZ Rides on 5G Network Strength
Verizon plans to accelerate the availability of its 5G Ultra Wideband network across the country. The company’s growth strategy includes 5G mobility, nationwide broadband and mobile edge compute and business solutions. Verizon’s 5G mobility service offers an unmatched 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. Verizon’s mmWave footprint delivers game-changing experiences for the densest parts of the network and offers highly predictable signal waves leading to greater efficiency and less interference for customers.
The low band spectrum (nationwide 700 MHz licenses and 850 MHz spectrum) continues to provide the best 4G LTE experience in the industry. It supports nationwide 5G service, giving customers in more than 2,700 markets access to 5G. Verizon’s mid-band spectrum assets include AWS, PCS, CBRS and C-band spectrum. The C-Band spectrum offers greater coverage for 5G networks and greater speeds than on low band spectrum and paves the way to provide differentiated service of 5G Ultra Wideband service to millions of customers.
VZ Focusing on Fiber Densification
Verizon has been aggressively forging ahead to expand its fiber optics networks to support 4G LTE and 5G wireless standards as well as wireline connections. The company remains focused on making necessary capital expenditures due to the continued expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to cater to huge traffic demands across multiple verticals and the continued deployment of the fiber infrastructure.
Price Performance of VZ
Verizon has gained 12.9% over the past year compared with the industry’s growth of 39.1%, lagging peers like AT&T Inc. T and T-Mobile US Inc. TMUS.
One-Year Price Performance
Image Source: Zacks Investment Research
Estimate Revision Trend of VZ
Earnings estimates for Verizon for 2024 have moved down 0.4% to $4.61 over the past year, while the same for 2025 has declined 1% to $4.73. The negative estimate revision depicts bearish sentiments for the stock.
Image Source: Zacks Investment Research
Margin Woes Hurt VZ’s Growth Prospects
Despite solid wireless traction, Verizon is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. Moreover, to expand its customer base, Verizon is spending heavily on promotion and is offering lucrative discounts, which are weighing on margins.
VZ also recorded high capital expenditures to support the launch and continued build-out of its 5G Ultra Wideband network, deployment of significant fiber assets across the country and upgrade to Intelligent Edge Network architecture. The company has splurged in the C-Band auction that is offering airwaves in the 3.7 gigahertz-to-4.2 gigahertz area of spectrum to acquire key mid-band spectrum for extensive 5G deployments. Unless the high auctioning expenses are justified, margins are likely to be compromised significantly.
Image Source: Zacks Investment Research
Steady Erosion of VZ’s Legacy Services
Verizon registered 74,000 Fios Video net losses in third-quarter 2024, reflecting the ongoing shift from traditional linear video to over-the-top offerings. For 2024, the company has offered muted guidance and expects wireless service revenues to grow in the range of 2-3.5%.
The company operates in a competitive and almost saturated U.S. wireless market. Spectrum crunch has become a major issue in the U.S. telecom industry. Most carriers are finding it increasingly challenging to manage mobile data traffic, which is growing by leaps and bounds. The situation has become even more acute with the growing popularity of iPhone and Android smartphones as well as rising online mobile video streaming, cloud computing and video conferencing services.
End Note
By investing steadily in infrastructure and pioneering new technologies, Verizon is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid subscriber growth, higher average revenue per user and increased broadband and fiber penetration.
However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. With a Zacks Rank #3 (Hold), Verizon appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>AT&T Inc. (T) : Free Stock Analysis Report
Verizon Communications Inc. (VZ) : Free Stock Analysis Report
T-Mobile US, Inc. (TMUS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
