The sellers were in control for a long time, but now it looks like Verizon (NYSE:VZ) stockholders are finally getting a taste of sweet revenge. Verizon has a lot to offer value-focused traders and passive-income investors, and I am definitely bullish on VZ stock for the rest of 2023.
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Verizon is a true giant in the world of telecommunications. For decades, the firm has provided broadband and wireless access for phones and internet use, among other services.
Yet, as big as Verizon is, the market hasn’t favored this company for a long time. So, is a turnaround in store? I’d say it’s already happening, with Verizon stock short-sellers running for cover this week.
Verizon: Why the Market Abandoned a Solid Company
If any company on the New York Stock Exchange could be described as solid, it’s Verizon. First of all, Verizon is a household brand name with a gigantic $144 billion market cap.
Second, Verizon has an excellent track record of beating analysts’ consensus quarterly EPS estimates. It should also be noted that Verizon is a consistently profitable company. It’s generally a safe company to invest in, as even when inflation is high, people aren’t likely to give up their phone and internet services.
Furthermore, Verizon rewards its loyal investors with an absolutely amazing forward annual dividend yield of nearly 8%. To provide a basis for comparison, the communication services sector average dividend yield is 2.541%. In addition, Verizon has been known to raise its dividend payouts on a regular basis.
What about value-oriented investors? No worries, as there’s something here for them as well. As of the close of the stock market on October 24, Verizon had a trailing 12-month price-to-earnings (P/E) ratio of just 6.9x. That’s substantially lower than the already-low sector median P/E ratio of 16x.
Yet, 2023 has been a year marked by rotation from value stocks to high flyers, like the “Magnificent Seven” mega-cap technology stocks. Traders weren’t looking for “steady-Eddie” stocks and dividend distributors; they wanted AI-market movers like Nvidia (NASDAQ:NVDA).
There’s nothing wrong with investing in Nvidia, but I believe investors should consider diversifying their portfolios with some solid names like Verizon. Nevertheless, Verizon was recently put to the test with a crucial earnings report. So, did this old telecom titan make the grade?
Verizon Makes the Bulls Smile with a Beat-and-Raise Report
Not only did Verizon make the grade, but the company also made the bulls smile with outstanding third-quarter 2023 financial results today. After sliding almost all year long, Verizon stock jumped by over 9% today, sending the short-sellers into hibernation.
I believe this should have happened a long time ago, but market rotation can persist for a long time. At least now, the market can really appreciate Verizon’s rock-solid qualities.
Even the most pessimistic bears can’t deny Verizon’s strength in Q3. The company’s third-quarter EPS of $1.22 beat Wall Street’s call for $1.18. Meanwhile, Verizon’s revenue declined by 2.6% year-over-year to $33.33 billion, but this result was roughly in line with the consensus estimate.
Perhaps the best part of Verizon’s third-quarter report was that the company increased its broadband subscriber count by 21% year-over-year to approximately 10.3 million. Q3 2023 also marked the fourth consecutive quarter in which Verizon reported more than 400,000 broadband net additions.
On top of all that, Verizon raised its full-year 2023 free cash flow guidance from $17 billion previously to more than $18 billion currently. Wall Street’s experts had expected $17.5 billion, so there’s another win for Verizon.
Is Verizon Stock a Buy, According to Analysts?
On TipRanks, VZ comes in as a Moderate Buy based on four Buys and eight Hold ratings assigned by analysts in the past three months. The average Verizon stock price target is $39.18, implying 14.2% upside potential.
Conclusion: Should You Consider Verizon Stock?
There’s a lot to like about Verizon, even if the market didn’t care about the company for most of 2023. Verizon’s dividend yield is higher than what Treasury bonds will pay you. Moreover, the company’s shares trade at a reasonable valuation.
Plus, Verizon just upheld its track record of great quarterly results with an EPS beat and raised its free-cash-flow guidance for the year. Consequently, VZ stock may finally be on the path to a well-deserved comeback, and I believe that investors ought to consider a position in it.
