Analyst Note| Michael Hodel, CFA |
Verizon Communications posted solid fourth-quarter results and offered a reasonably strong outlook for 2021, calling for wireless services revenue growth of at least 3% (up from 0.7% in 2020). However, quarterly results ignore the sizable elephant in the room: the C-band spectrum auction, which recently ended with more than $80 billion in winning bids. The firm can’t discuss the auction until the Federal Communications Commission reveals winning bidders, but Verizon ended 2020 with $22 billion in cash on hand, a huge pile that indicates it was a big spender. As the C-band auction heated up late last year, we lowered our fair value estimate to $57 per share from $59 on the expectation that Verizon would spend $40 billion to acquire new spectrum licenses; that estimate still looks reasonable to us. We believe the shares are fairly valued.