On Tuesday, KeyBanc maintained its positive stance on Verizon Communications (NYSE:VZ), reiterating an Overweight rating and a stock price target of $46.00. The firm's analysis follows Verizon's first-quarter results, which were reported to be consistent with expectations, and the confirmation of their guidance for 2024.
KeyBanc highlighted Verizon's significant churn improvement and better Average Revenue Per Account (ARPA) despite recent price hikes.
Verizon's subscriber growth was noted to be gaining momentum at the end of the first quarter, a trend that is expected to carry into the second quarter. KeyBanc suggests that the current pullback in Verizon's stock is an opportunity for investors to increase their positions.
The firm's confidence in the telecom giant is backed by four key points: an uptick in VCG postpaid phone net additions, robust Broadband subscriber growth, an uptick in adjusted EBITDA, and a continuation of strong free cash flow (FCF).
The maintained stock price target of $46 is based on a valuation of 6.9 times KeyBanc's 2025 adjusted EBITDA estimates for Verizon. This valuation is in line with both the three-year and ten-year historical averages of 6.9x and 6.8x, respectively.
KeyBanc's outlook remains firm even as they acknowledge potential concerns from skeptics regarding the possible impacts of the "Second Number" feature and a 50 basis points risk to Wireless Service revenue.
The analyst suggests that these bearish concerns are overshadowed by Verizon's positive performance indicators. The company's ability to retain customers and grow its subscriber base, even with increased pricing, appears to be a strong sign of its market position and operational strength.
In summary, KeyBanc's assessment underscores a steady confidence in Verizon's financial health and growth prospects. The firm's maintained Overweight rating and price target reflect a belief that Verizon is well-positioned to continue its positive trajectory in the telecommunications sector.
InvestingPro Insights
In support of KeyBanc's optimistic outlook on Verizon Communications (NYSE:VZ), current metrics from InvestingPro provide additional context for investors considering the telecom giant. With a solid market capitalization of $166.93 billion and a trailing P/E ratio that stands at an attractive 9.68, Verizon showcases a strong financial stature in the market.
The company's commitment to shareholder returns is evident through its impressive track record of raising dividends for 19 consecutive years, a fact that aligns with KeyBanc's positive assessment. Moreover, Verizon offers a substantial dividend yield of 6.89%, which is particularly appealing to income-focused investors.
Verizon's operational strength is further highlighted by its low price volatility, a characteristic that may provide some stability in an investor's portfolio. Moreover, the company's status as a prominent player in the Diversified Telecommunication Services industry is reinforced by analyst predictions of profitability for the year, coupled with a profitable performance over the last twelve months.
Investors looking for more in-depth analysis can find additional InvestingPro Tips on Verizon, enhancing their decision-making process. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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