Verizon: Cheaper Than AT&T After Weak Q3, Potentially Unfairly
(Preview) Company Update (VZ US) (Neutral)
Summary
Verizon shares are near their 5-year low, having lost 12.5% since our downgrade in July, underperforming AT&T shares by 18 ppt.
Verizon's EBITDA had grown less than AT&T's in recent quarters, but partly because the latter had fallen more in 2021.
AT&T's faster EBITDA growth has largely been driven by its wireless business, which we believe is benefiting from past promotions.
Verizon is now following with its promotions and cost cuts, and the risk of a mutually-destructive price war is real.
Verizon is now cheaper than AT&T, with a similar 7.4x P/E and a higher 6.8% Dividend Yield. However, we would avoid both stocks.
Introduction
We review our Hold rating on Verizon Communications Inc. after shares remain near their 5-year low in October (just after Q3 results on October 21), and 37% below the level at the start of 2020.
Verizon shares have lost 12.5% (after dividends) since our downgrade in July, an 18 ppt underperformance compared to shares in AT&T, Verizon’s main competitor.
Verizo…