Buoyed by a holistic growth model, Verizon Communications Inc. VZ was trading at $42.36 – near its 52-week high of $45.36 – at the close of trading hours yesterday. The stock has gained 12.5% over the past year compared with the national wireless industry’s growth of 36%. Despite lagging peers like AT&T Inc. T and T-Mobile US Inc. TMUS, the stock appears poised to gain further.

Verizon Stock One-Year Price Performance

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VZ Rides on Wireless Traction

With one of the most efficient wireless networks in the United States, Verizon delivers faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and steady infrastructure investments. The company has been aggressively forging ahead to expand its fiber optics networks to support 4G LTE and 5G wireless standards as well as wireline connections.

The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These include massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.

Verizon is witnessing significant 5G adoption and fixed wireless broadband momentum with premium unlimited plans. The telecom giant plans to accelerate the availability of its 5G Ultra Wideband network across the country. The company’s growth strategy includes 5G mobility, nationwide broadband and mobile edge compute and business solutions. 

The deployment of a cloud-native, container-based, virtualized architecture for higher flexibility, scalability and cost efficiency across its network is likely to benefit the company’s long-term growth. Mix-and-match pricing plans for wireless and home broadband have further led to solid customer additions.

Verizon Bets Big on Fiber Network

Verizon has entered into a definitive agreement to acquire Frontier Communications Parent, Inc. (FYBR), the largest pure-play fiber provider in the United States. The deal, worth approximately $20 billion of enterprise value, aims to expand Verizon’s fiber footprint across the nation, accelerating its delivery of premium mobility and broadband services to current and new customers.

Post-acquisition, Verizon will integrate Frontier’s state-of-the-art fiber network within its Fios network to boost its industry-leading portfolio of fiber and wireless assets. Additionally, the combination of Frontier’s premium broadband with Verizon’s premium mobile offering is anticipated to improve the customer churn rate by approximately 50% for postpaid mobility. This is expected to boost the revenues of the mobility division. Verizon expects to achieve a minimum of $500 million in run-rate cost synergies by the third year, backed by increased scale, distribution and network integration.

Verizon has also expanded Fios Forward to support digital inclusion and provide opportunities for underserved households to thrive in the digital world. With no data caps, Fios customers can experience faster upload and download than comparable plans.

VZ Plagued by Margin Woes

Despite solid wireless traction, the company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. Moreover, to expand its customer base, Verizon is spending heavily on promotion and offering lucrative discounts, which are weighing on margins.

VZ also recorded high capital expenditures to support the launch and continued build-out of its 5G Ultra Wideband network, deployment of significant fiber assets across the country and upgrade to Intelligent Edge Network architecture. The company has splurged in the C-Band auction, which is offering airwaves in the 3.7 gigahertz-to-4.2 gigahertz area of spectrum to acquire key mid-band spectrum for potential 5G deployments in the next few years. Unless the high auctioning expenses are justified, margins are likely to be compromised significantly.

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Eroding Legacy Services Mar VZ’s Growth Prospects

Verizon is facing a steady decline in legacy services. The company registered 74,000 Fios Video net losses in the third quarter of 2024, reflecting the ongoing shift from traditional linear video to over-the-top offerings. For 2024, the company has offered muted guidance and expects wireless service revenues to grow in the range of 2-3.5%.

The company operates in a competitive and almost saturated U.S. wireless market. Spectrum crunch has become a major issue in the U.S. telecom industry. Most carriers are finding it increasingly challenging to manage mobile data traffic, which is growing by leaps and bounds. The situation has become even more acute with the growing popularity of iPhone and Android smartphones as well as rising online mobile video streaming, cloud computing and video conferencing services.

Earinings Estimate Revision Trend of VZ

Earnings estimates for Verizon for 2024 have remained almost steady at $4.61 over the past year, while the same for 2025 has declined marginally to $4.74. These portray a cautious approach to the stock.

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End Note

By investing steadily in infrastructure and pioneering new technologies, Verizon is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid subscriber growth, higher average revenue per user and increased broadband and fiber penetration.

However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The marginal downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. With a Zacks Rank #3 (Hold), Verizon appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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