Verizon Earnings: We’d Prefer Management Surrender Customer Growth for Long-Term Profitability

Verizon delivered underwhelming first-quarter results, with an unfavorable balance between new customer wins and customer retention. Cash flow growth remains management’s top priority, but we believe the firm has still placed too much emphasis on customer growth, at least in its communication with investors. We are maintaining our $57 fair value estimate, which assumes Verizon accepts its fate as one of three strong but relatively undifferentiated U.S. wireless carriers. We believe the shares remain attractive.