Is Verizon Stock A Good Investment? – (VZ)
Can 5G coverage boost Verizon stock?
Verizon is rolling out 5G capabilities in some urban markets across the U.S, this includes Houston, Indianapolis, Los Angeles and Sacramento will have 5G coverage. Verizon is beginning coverage on October 1st in these places.
By offering 5G, Verizon will be keeping its wireless customers fulfilled. Not to mention, Verizon will likely increase its market share in the wireless communications market. Not many service providers will be offering 5G coverage, which may cause some customers to choose Verizon over current providers.
Verizon stock already offers fiber optic solutions with its Fios product. Because of municipal government interference, Fios has been stalled by cost. AT&T’s fiber option project was also impacted by government interference. DSL is not an option for customers unless it is their only option.
Verizon Future Growth
Verizon stock is capable of being the market leader in 5G technology, if working at capacity, 5G can deliver higher speed internet than most other service providers. If VZ can dominate the 5G market, the Verizon stock price will be significantly impacted.
For 5G to work, you may need lots of antennae. The Cellular Telecommunications Industry Association says that nearly 300,000 antennae are needed for the first wave of 5G coverage to work. In the U.S there are only 30,000 antennae initially installed.
The high volume of antennas needed means that spending will be high. Along with government deals to be negotiated relating to Verizon placing antennas on light polls and utility polls. Some cities are demanding that service providers pay thousands a year for each pole that antennas are placed on. Some places like New York City charge up to $5,100 a year for some poles to have antennas placed on them.
The FCC has since worked out a deal with Verizon to cap the rates that the government charges for poles. The average pole now costs $270 to put an antenna on it. This is great for Verizon stock price, as costs won’t be so high, meaning better margins.
The cost of 5G coverage is not cheap, IHS Markit forecasts 5G coverage to cost around $200 billion a year for phone companies, equipment companies and suppliers.
Verizon Stock Prediction
In recent times, Verizon has been more cautious on cost than ever before. The company has cut fixed assets over the past few quarters. Verizon also announced that it would be carrying out layoffs from the top down. It is offering buyouts of several weeks pay in relation to how many years a person has worked at the company.
Revenues are nothing special, with growth being negligible over this past year. This past quarter has been fulfilling for Verizon stock, as it gained 5.4%, which looks promising going forward.
On the whole, Verizon is a major cash cow and Verizon stock is improving margins constantly. Operating margins sit at 21.8% which produces a healthy return. Investors are given a return on their equity at 80.26%.
Verizon stock dividend is also enticing for VZ shareholders. Sitting at 4.5%, Verizon stock dividend has increased by 2.76% on average each year the past 5 years.
5G will be costly for Verizon, causing margins to be thinner for the next few quarters. 5G is likely to be the future of mobile communications, but that may not come as soon as some people may thing.
For Verizon stock holders, the company is in a developing phase. It is good for dividend payouts and stock price appreciation over the years. In the past 10 years, Verizon stock has produced an average annual total return of 11.39%… outperforming its rival companies in the S&P 500 Communications Services index by a huge margin.
Until Verizon progresses with 5G, its rating is a “HOLD”