Verizon: Look Past Mixed Q1, Focus On 9x P/E & 5% Dividend Yield

(Preview) Company Update (VZ US) (Buy)

Summary

• Verizon shares were weak in the past month after Q1 results, and are now at a 9.3x P/E and a 5.2% Dividend Yield, a bargain.

• Comparing Q1 directly with prior periods can be misleading due to a number of one-off items; underlying trends were actually solid.

• Consumer Postpaid revenues likely grew 4% year-on-year, with Average Revenue Per User up 2.6%, before inflation was significant.

• Consumer Broadband saw large gains in Fixed Wireless. Business EBITDA was distorted by higher device sales and a tough comparable.

• With shares at $49.53, we expect an exit price of $79 and a total return of 82% (19.8% annualized) by 2025 year-end. Buy.

Introduction

We review our Verizon Communications Inc. investment case after another month of weakness in its stock.

Verizon shares initially fell by 16% in the days following Q1 2022 results on April 21, but have rebounded partially afterwards. Since we initiated our Buy rating in September 2021, VZ stock has lost 5.5% (after dividends), though outperformin…