1 Buffett Stocks Near 52-Week Lows
On December 4, 2020, Verizon shares were trading for about $61.50. That’s the highest price Verizon has ever managed to reach. From that moment, the price took a turn for the worse. Over the last 52 weeks, Verizon has been as high as $59.85 and as low as $49.68.
Although the share price has underwhelmed recently, let’s reserve judgment for a moment until we have taken a closer look at the company’s recent performance and future opportunities.
Reasons for Optimism
In reviewing Verizon’s quarterly and annual reports going back to 2014, there are several reasons to be optimistic.
Importantly, the company reported $17.8 billion in total wireless service revenue, a 6.5% year-over-year increase. For all of 2021, Verizon increased its total wireless service revenue by 4.7%.
Verizon also added more than a million retail sales, bringing the company’s reach to about 142.8 million. The one time bump in new revenues is less appealing than the ongoing subscription revenues that typically last years and even decades.
Other successes for the year include:
- Closing the sale of Verizon Media.
- Completing the acquisition of TracFone Wireless.
- Increasing annual dividends for the 15th year in a row.
- Meeting the $10 billion cost-savings goal set in early 2021.
Setting the Stage for Future Growth
Verizon had a good year. It wasn’t a phenomenal year, but it was quite good.
Setting the stage for future growth costs money, which can cause the company to spin its wheels in the short-term as new initiatives are being ramped up. That’s a sacrifice long-term investors applaud.
What did Verizon do in 2021 that prepares it for growth in 2022 and beyond?
More Customers Use 5G Devices
Perhaps most importantly, Verizon has managed to get about 34% of its consumer customers to upgrade to 5G-capable devices.
5G technology will play a critical role in the future success of mobile service providers. Convincing customers to upgrade to new devices is essential, though.
If people hold on to their old devices, they will not experience the benefits of 5G technology, such as faster download and streaming speeds. By growing the percentage of customers using 5G devices, Verizon helps secure its own prominence in the upcoming years.
Verizon Now Partners With Major Cloud Providers
So far, Verizon is the only carrier with mobile edge computing partnerships with AWS (Amazon Web Services), Microsoft Azure, and Google Cloud. These are the three most prominent cloud service providers in North America. By securing these partnerships, Verizon has positioned itself for long-term success as more people want to use more powerful mobile apps.
Increased IoT Functionality
Verizon’s 5G Nationwide network now has a suite of Intelligence features that make it more compatible with Internet of Things (IoT) devices.
Verizon’s 52-Week Low Could Present an Opportunity for Investors
No matter what you think of Verizon’s 2021 performance, it’s difficult to argue that the company should have a lower value than it did in 2018, when the company’s stock price was below $50.
When we ran valuation models, the results were surprising. A 10 year DCF EBITDA model revealed a fair market price of $80.10, which would represent upside of 53% from current price levels at the time of research.
Using an Earnings Power Value model, we arrived at an intrinsic price per share of $77.13.
A dividend multi-stage model put a fair market value of $94.32 on Verizon.
No matter how you slice and dice Verizon, the share price appreciation potential is significant. And yet something must be holding the share price back, what is it? Naysayers point to $7.3B, the current portion of long-term debt and the debt-laden balance sheet. Undoubtedly the business model is capital intensive, but it seems Verizon has made the right strategic moves to cut costs. In the meantime and until the share price resumes its uptrend, the company pays a very generous 4.85% dividend.
