Verizon Stock Had A Tough 2022. Will Next Year Be Better?
Wireless behemoth Verizon (NYSE:VZ) had a tough year, with its stock falling by about 26% year-to-date, underperforming peers AT&T (NYSE:T), which remains down 4% year-to-date, and T-Mobile (NASDAQ:TMUS) which was up 22%. The decline comes as Verizon falls behind rivals in the lucrative postpaid phone market that it once dominated. For perspective, over the most recent quarter (Q3 2022) postpaid phone net additions came in at just 8,000 compared to T-Mobile and AT&T who added 854,000 and 708,000 postpaid phone subscribers, respectively. While AT&T has been resorting to attractive device promotions, T-Mobile has been benefiting from the strength of its 5G network and its expanding coverage in rural areas. Investors are likely concerned that Verizon might choose to get more aggressive with its pricing and promotions in order to win back subscribers, further weighing on its profitability. The company already expects earnings to trend lower this year, with the upper end of EPS projected at $5.25, compared to a $5.39 per share in 2021, due to rising costs and slower growth. Separately, Verizon’s business segment is also seeing a slowdown, as high inflation and rising interest rates put pressure on corporates.
So will 2023 be a better year for Verizon? Verizon has been making good progress with the roll-out of its mid-band C-band spectrum for 5G, with its ultra high-speed 5G coverage now reaching over 175 million people. The company expects its 5G Ultra Wideband offering to reach nationwide coverage in Q1 2023, ahead of schedule. This could help the company win over more subscribers and up-sell superior plans to its massive retail wireless base of over 120 million subscribers. Moreover, the company is also increasing its presence in the budget wireless market via TracFone and this is potentially well-timed, given the tough economic environment. The risk-to-reward tradeoff for Verizon is also looking attractive with the stock trading at just about 7x forward earnings currently. We value Verizon stock at $44 per share, which is about 15% ahead of the current market price. See our analysis on Verizon Valuation: Expensive or Cheap for more details on Verizon’s valuation and how it compares to peers. For more details on Verizon’s key revenue streams and how they have been trending, check out our analysis of Verizon Revenue.
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| Returns | Dec 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| VZ Return | -1% | -26% | -28% |
| S&P 500 Return | -6% | -19% | 72% |
| Trefis Multi-Strategy Portfolio | -6% | -22% | 212% |
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[1] Month-to-date and year-to-date as of 12/27/2022
[2] Cumulative total returns since the end of 2016
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