2024-02-08 22:29:37 ET
Summary
- Verizon has struggled to turn subscriber growth into revenue or income expansion in Q4 FY23 and in their full-year results.
- The closing of the AOL and Yahoo divestitures should allow Verizon to focus on its core telecommunications business and potentially yield margin expansion in the future.
- Despite the recent rally in shares, I calculate VZ to still be trading at a 22% undervaluation.
- I do not believe the current undervaluation provides enough margin of safety given a weaker economic outlook for 2024.
- Rating downgrade to Hold.
Investment Thesis
Verizon ( VZ ) has had a tough FY23 and Q4 as the telecommunications giant has struggled to turn subscriber growth into revenue or income expansion.
A softening consumer has resulted in wireless equipment revenues falling YoY all the while service revenues remain essentially flatline.
The closing of the AOL and Yahoo divestitures should allow Verizon to focus more on their core telecommunications business which hopefully will yield margin expansion in the coming years.
Nevertheless, the recent rally in shares since late 2023 has left Verizon shares trading at around a 22% undervaluation given a base-case earnings scenario for 2024....
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For further details see:
Verizon: Q4 And 2023 Earnings, Subscriber Growth, Media Loss And Revenue Declines (Rating Downgrade)