October 25, 2021

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Is Verizon Stock a Purchase?

Verizon Communications (NYSE:VZ) is having an excellent 2021. Its next-quarter revenue grew an extraordinary 10.9% calendar year over calendar year, but provided the pandemic’s adverse effects very last year, an increase is to be predicted. What’s noteworthy is that Verizon also beat 2019’s next quarter by 5.3%, in spite of the continuing outcomes of COVID-19.

Even so, the overall performance did minimal for the stock value, which experienced attained a 52-7 days substantial of $61.95 previous December, but now trades close to $55 for each share. Does this develop a buy option, or is there a reason for worry amid the solid second-quarter outcomes?

Picture supply: Getty Images

Indications of 5G’s influence

Next-quarter final results point to lots of positives about the company’s course. Income of $33.8 billion not only bested very last year’s $30.4 billion, it also exceeded 2019’s $32.1 billion. But even far more major is the period’s wi-fi tools profits. It rose 47.7% year about calendar year as much more clients upgraded devices.

The rise in wi-fi tools earnings has lengthy been brewing. The advent of 5G technologies promised new profits chances, among them upgrades to devices that guidance 5G. Verizon’s modern quarterly outcomes indicate this is occurring.

Customer updates have resulted in about 20% of Verizon’s wi-fi cellular phone foundation now remaining on 5G-enabled units. CFO Matt Ellis claimed he expects to see “superior equipment volumes in the next 50 percent of the year” thanks to enterprise promotions merged with new 5G-enabled devices hitting the sector.

In the first 50 % of 2021, Verizon pulled in a lot more wi-fi devices income than it has in the earlier two several years.

Profits for the 6 Months Finished June 30 2021 2020 2019
Company income and other $56.1 billion $54.2 billion $54.5 billion
Wireless products earnings $10.5 billion $7.9 billion $9.7 billion

Data source: Verizon.

Other things to take into account

Its good results in wi-fi products profits adds to Verizon’s regularity in delivering wi-fi company earnings. This section created $28.2 billion in 2nd-quarter earnings, which exceeded the two 2020’s wireless support profits of $26.7 billion and 2019’s $27.4 billion.

Wireless service earnings was aided by progress in the company’s postpaid customer phase, the telecom industry’s most worthwhile purchaser kind. Postpaid net adds greater to 528,000, beating final year’s 352,000 as well as 2019’s 451,000 postpaid internet adds.

The firm’s potent first-50 % general performance led Verizon to increase its 2021 assistance for expansion in total wi-fi support profits from a 3% bare minimum to in between 3.5% and 4%. Inspite of its very first-fifty percent accomplishment, the stock selling price moved minor in the days pursuing its second-quarter earnings launch. A few factors played into this.

The quarter’s wi-fi assistance profits incorporated earnings from its Verizon Media business device. This division includes world-wide-web houses these types of as Yahoo!, and it included $2.1 billion to the quarter’s final results, a whopping 50% year-above-yr enhance. This outcome served propel Verizon’s company revenue and other phase to year-above-year growth, but Verizon Media is remaining offered.

In addition, the firm’s credit card debt has risen. Verizon needed to devote $52.9 billion previously this year to seize very important spectrum necessary to gas its 5G community. The firm’s complete personal debt stood at $151.9 billion at the conclusion of the quarter compared to $112.8 billion previous year.

The remaining verdict

The personal debt load is regarding, but Verizon is whittling away at it. At the stop of the first quarter, total personal debt was $158.5 billion, so the organization managed to chip away $6.6 billion by the end of the second.

Also, Verizon’s greater steering for wi-fi services income does not involve Verizon Media contributions. It really is based mostly on the strength of the wireless business enterprise, assisted by aspects these types of as soaring customer adoption of higher-priced wi-fi options. In the 2nd quarter, the firm relished a document substantial in new accounts opting into its quality endless ideas.

And let us not ignore Verizon’s dividend. Its payouts are secure many thanks to the firm’s sturdy free of charge money flow, which stood at $11.7 billion by way of the 1st six months of 2021. $5.2 billion of that funds went toward dividend payments.

Rival T-Cell (NASDAQ:TMUS) features no dividend, and AT&T‘s (NYSE:T) dividend is most likely to drop with the impending sale of its media enterprise. Meanwhile, Verizon has lifted its dividend for 14 consecutive several years, and is predicted to improve it yet again this 12 months.

Verizon is in a very good position to see continued earnings growth with 5G adoption nevertheless in its early days. The a lot of positives in its business enterprise outweigh its elevated debt load and reduction of Verizon Media earnings. These factors make it a worthy expenditure, specifically as a secure income inventory.


This article represents the feeling of the author, who might disagree with the “official” advice place of a Motley Fool premium advisory assistance. We’re motley! Questioning an investing thesis — even one of our personal — will help us all feel critically about investing and make selections that assistance us develop into smarter, happier, and richer.