Why These Verizon Communications Analysts Are Worried Despite Upbeat Q3

Verizon Communications Inc. VZ recently reported third-quarter revenues of $34.2 billion and adjusted non-GAAP earnings of $1.32 per share.

Both figures surpass Street expectations.

Shares declined after the release of results, with the New York-based telecom company reporting disappointing net post-paid phone subscriber additions. Here's what analysts are saying:

See Also: Verizon Stock Suffers As Customers Switch To AT&T, Telus

Raymond James

Analyst Frank Louthan reiterated an Outperform rating, while reducing the price target from $54 to $51.

"Verizon is drawing a line in the sand that they will be able to have positive consumer post pay phone net adds in 4Q, based on a variety of strategies they plan to employ to drive better retention, more store traffic, and tactical marketing,” Louthan said in a note.

“The goal here is to get the gross adds up with more shots on goal and fewer defections, while reaping the rewards of what management believes is the sequential improvement in churn as the sticker shock from their price hikes falls away," he added.

KeyBanc Capital Markets

Analyst Brandon Nispel maintains a Sector Weight rating, citing the company's mixed results for the third quarter.

Post-paid phone subscriptions are worse than consensus, “which does little to discourage the bear thesis that VZ has lost its network edge and either VZ's premium pricing or subscriber base will erode," Nispel said. “2022 guidance reiterated though 2023 is likely to have some headwinds."

Check Out Other Analyst Stock Ratings.

RBC Capital Markets

Analyst Kutgun Maral reaffirmed a Sector Perform rating, while reducing the price target from $50 to $42.

“Continued momentum across business wireless, accelerating fixed wireless net adds, improving results across prepaid, robust postpaid ARPA growth, and upside to revenue/EBITDA/FCF estimates were overshadowed by continued softness across consumer postpaid phone trends,” Maral wrote in a note.

“While we believe the negative reaction to the print was overblown (VZ -4.5% vs. S&P 50 +2.4%), it’s clear that Verizon needs to showcase improved and sustainable traction across the segment for sentiment to inflect — a tall order given its position as the carrier with the largest customer base and with premium pricing in a competitive market that is likely heading into an increasingly challenging macro backdrop,” he further mentioned.

Morgan Stanley

Analyst Simon Flannery reiterated an Equal-Weight rating and a price target of $58.

“Verizon’s wireless KPIs continue to lag behind peers with just 8k postpaid phone net adds this quarter,” Flannery said.

Verizon’s stock yields more than AT&T Inc. T for the first time in several years, “and the company has less exposure to business wireline, but investors are still looking for more signs that Verizon can share more of the wireless industry subscriber growth,” he added.

VZ Price Action: Verizon opened at $35.58 per share on Monday, Oct. 24. For more coverage and guidance, click here.