Skip to Content
Stock Analyst Update

Verizon Shares Fairly Valued After First Quarter

We are maintaining our fair value estimate for the narrow-moat firm.


Verizon (VZ) weathered COVID-19 reasonably well during the first quarter, though changes in its reporting structure (dubbed Verizon 2.0) make interpreting results more challenging. Management withdrew revenue guidance for 2020, owing primarily to the uncertainty around wireless phone sales, but lowered EPS expectations to a change of +/-2% versus 2019 from 2%-4% growth. Wireless service revenue in the second quarter is forecast to come in 3%-5% below management’s prior expectations (implying about a 2% year-over-year decline) because of lower overage charges, waived late fees, lower roaming revenue, and customer losses due to the economy. While this projected hit is slightly larger than we’d anticipated, several of the causes should dissipate over the course of the year. We expect wireless demand will remain very resilient in the face of economic weakness. Verizon indicated that about 800,000 customers (around 2% of wireless accounts) have contacted it regarding the FCC’s “Keep Americans Connected Pledge,” indicating difficulty paying their bills (not necessarily nonpayment). We don’t expect to change our $59 fair value estimate, and we view Verizon shares as fairly valued.

Net postpaid wireless customer losses hit 68,000, a bit worse than a year ago (44,000) and lagging AT&T’s 163,000 gain during the quarter. Verizon has posted relatively weak customer metrics during the first quarter for several years in a row, perhaps indicating somewhat more seasonality in its base than rivals’. With the COVID-19 impact materializing late in the quarter, average revenue per account increased 1.7% year over year, albeit the slowest pace in more than a year. This metric will likely decline over the remainder of the year. Wireless service revenue increased 1.9% versus a year ago during the quarter. Verizon no longer discloses wireless profitability, but segment margins likely improved nicely as phone upgrade volumes and gross customer additions slowed.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Michael Hodel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.