Skip to Content
Stock Analyst Update

Verizon Shows Stability During Second Quarter

Overall, Verizon is performing broadly in line with our expectations, and we don’t plan to change our $59 fair value estimate or narrow moat rating.

Mentioned:

Verizon’s (VZ) second-quarter results looked a bit more like we had expected, given the pandemic, than AT&T’s (reported July 23), but we suspect the differences primarily come down to the treatment of customers struggling to pay their bills and taking advantage of the Keep Americans Connected pledge. Both firms produced broadly stable wireless results during the quarter, with the pandemic taking a small bite out of services revenue as customers roam less, especially internationally. Unlike AT&T, Verizon reported a huge jump in free cash flow (up nearly 75% to $13.7 billion in the first half), but the growth is primarily due to the timing of tax payments and working capital changes. Still, Verizon was able to repay a large chunk of debt during the quarter and has cut net borrowing by nearly $4 billion, or 4%, through the first six months of the year. Overall, Verizon is performing broadly in line with our expectations, and we don’t plan to change our $59 fair value estimate or narrow moat rating; we view shares as fairly valued.

Verizon reported a sharp drop in wireless customer defections during the quarter: 0.58% monthly postpaid phone customer churn versus 0.76% a year ago. AT&T’s reported churn metrics were roughly flat versus a year ago. However, it appears Verizon has kept customers behind on their payments in its customer count while AT&T has removed them. Verizon stated that about 1.5 million accounts (4% of the total) had taken advantage of Keep Americans Connected, but that a third of those were current by the end of quarter and the majority had made at least partial payments. Verizon reported a small gain in wireless postpaid phone customers (173,000) while AT&T reported a small loss (151,000), but we suspect the firms performed very similarly during the quarter. Both reported a small decline in wireless services revenue (1.7% at Verizon), tied primarily to lower revenue per customer resulting from lower roaming usage.

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.

Morningstar.com 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.