Verizon (NYSE:VZ) is on the Decline this Morning; Here’s Why

Communications giant Verizon (NYSE:VZ) posted its earnings this morning. The company offered up a fairly impressive picture. However, it wasn’t enough to stop the stock from falling. Verizon posted $1.32 per share in earnings, leaving out “special items.” That beat analysts’ projections of $1.29 per share. However, it faltered against this time last year, when the company posted $1.42 per share. Revenue, though, improved, with Verizon posting $34.2 billion against projections calling for $33.8 billion.

The last 12 months for Verizon shares were fairly stable until about mid-July. Verizon spent from October 2021 to the first part of July fairly close to $50. The farthest deviation came on April 28, when the company closed at $44.97 per share. However, once July 18 hit, the company started a decline that saw it threaten to break through $35 before ticking slightly back up.

This is odd for a company that’s seeing subscriber growth and one that’s also rolling out new programs fairly routinely. The macroeconomic picture doesn’t exactly bode well, but some of Verizon’s offerings are necessary for human survival these days. I’m cautiously bullish on Verizon but suggest that those involved watch out for further downturns.

Investor Sentiment for VZ Stock Looks Generally Bright

For the most part, Verizon’s investor sentiment metrics look pretty positive. Currently, Verizon has a Smart Score of 8 out of 10 on TipRanks. That’s the lowest level of “outperform,” and suggests a fairly good chance that Verizon will ultimately do better than the broader market.

Meanwhile, insider trading at Verizon has been comparatively quiet. The last informative transaction at Verizon was a sale six months ago when executive vice president and group CEO Tami Erwin sold just under $1.2 million in shares. The six months that followed, meanwhile, would show much less activity.

The aggregate shows not much activity at all, especially lately. In the last three months, insiders bought shares twice. Expanding out to a year, however, shows a lot more going on. Investors bought shares 33 times and sold shares 17 times. Interestingly, Verizon insiders were selling shares all throughout the plateau and into the drop around July. However, that’s where sales stopped. In fact, most of Verizon’s insider buying took place in February, when investors bought shares 23 times.

Big Moves Coming, but the Environment May Trouble VZ Stock

You’ve got to give Verizon credit. The company is rolling out new programs left, right, and center. It’s doing just about everything in its power to keep itself attractive to customers. That’s likely to be taken well in a macroeconomic environment that will be punishing at best for consumers of all sorts.

One of the biggest moves was just yesterday when Verizon lowered its prices on prepaid plans just ahead of its earnings report. Prices were to drop $5 a month, and potentially more for those who set up autopay plans.

Companies are increasingly turning to autopay plans, even to the point where they’ll offer discounts. T-Mobile (NASDAQ:TMUS) has been doing just that with its home internet plans.

Speaking of home internet plans, for a while, it seemed like Verizon was planning to simply concede several home-based markets to T-Mobile. That may no longer be the case, as Verizon’s Straight Talk imprint is bringing home internet service to Walmart (NYSE:WM) locations.

The Straight Talk internet service looks to be a match for T-Mobile’s, offering up data speeds of 50 Mbps on 4G LTE and Wi-Fi 6 Dual-band, as well as up to 100 Mbps on 5G. While customers will need to spend $99 for the router, they’ll get service for $45 per month. That’s slightly better than T-Mobile, which asks $50 per month for speeds between 33 and 182 Mpbs.

Plans such as these are huge in rural areas, where conventional cable and fiber internet don’t go due to the sheer expense of laying that much cable.

However, with wireless options available, customers get access to higher-speed connections for a comparatively reasonable expense. This gives the companies that provide such services access to a big new slug of customers.

While the macroeconomic environment will cause some customers to leave or at least seek lower-cost options, there’s a limit here. Internet access has become downright vital; it represents entertainment as well as a vital medium for job hunting. In some places, it’s the only real connection for vital supplies, as that’s where people do all their shopping.

This is good news for Verizon; the company is currently fending off some problems with a recent data breach. An “undisclosed number” of Verizon’s prepaid customers had their accounts accessed, and credit card data exposed following said breach. As recently as 2020, reports suggested that one in four Americans won’t do business with a company that had a data breach.

If Verizon wants any hope of getting that customer base back, it’s going to need to offer plenty of inducement. Programs like these look to do just that.

What is VZ Stock’s Price Target?

Turning to Wall Street, Verizon has a Hold consensus rating. That’s based on four Buys, 12 Holds, and two Sells assigned in the past three months. The average Verizon price target of $49.19 implies 38.92% upside potential. Analyst price targets range from a low of $33 per share to a high of $64 per share.

Conclusion: Verizon is Fighting Hard, but Maybe Not Hard Enough

There is no doubt that Verizon is fighting hard to keep its customer base strong going into a down economy. It’s lowering prices, bringing out new offers, and working hard to insulate itself from the worst of a data breach. The only question that remains is whether or not all the right moves are sufficient to break the demand-killer that is an inflation-heavy economy. Nevertheless, the company is likely to weather the storm and come out the other side. As a result, I’m cautiously bullish on Verizon.

Disclosure