Verizon: Q2 Better Than AT&T's, But Not Good Enough
(Preview) Rating Change (VZ US) (Downgrade to Neutral)
Summary
We downgrade our rating on Verizon to Hold after a disappointing Q2, even though the stock is at an 8.6x P/E and a 5.8% Dividend Yield.
Q2 saw Verizon affected by intensifying sector competition and struggled with pricing; EBITDA declined and may continue to fall.
In Consumer, Verizon's Retail Postpaid connections were flat, and pricing actions were delayed until the end of Q2 and partly phased.
Next to AT&T, Verizon's EBITDA decline was worse but it did not have the same collapse in cash flows, due to better discipline on promotions.
Ultimately, we are no longer comfortable with the risk to Verizon's profitability from irrational competitors. Avoid.
Introduction
We are downgrading our rating on Verizon Communications Inc. from Buy to Hold after disappointing results.
Verizon shares fell 6.7% on Friday (July 22) after the company released Q2 2022 results. Since we initiated our Buy rating in September 2021, VZ stock has lost 14.8% (after dividends), about 4 ppt worse than the S&P 500 …