Investment Bank Less Confident On Verizon Stock Price

The United States of America has four national carriers, offering coast-to-coast coverage. These are in subscriber number order, Verizon Wireless, AT&T, T-Mobile US and finally. Verizon Wireless and AT&T tend to operate their businesses in a somewhat more pedestrian, reactive manner compared with T-Mobile US and Sprint, which are out to grow their share of the business. In particular, Verizon Wireless has repeatedly stated over the last twelve months that America's largest carrier is aiming to keep the higher quality customer: in other words, those able and willing to pay higher prices for enjoying the benefits of Verizon's network. And like the other three national carriers, Verizon is pouring millions of dollars into maintaining and improving its current and future projects. The company is involved in the Internet of Things, 5G network trials and more, but as with many similar big businesses, Verizon Wireless is a publicly traded company. This means that it has stockholders who expect a return on their investment.

Today's story concerns a report that investment bank, Oppenheimer & Co, as downgraded its opinion of Verizon stock for a number of reasons. These include the uncertainty over its possible acquisition of the Yahoo core business, worries over the amount of money the carrier could be about to spend on the FCC's 600 MHz spectrum auction, the expected cost up front for the next generation Apple iPhone 7 due out this fall and finally concerns over the company's ability to grow wireless revenue despite the business chasing the better quality customer. Verizon's stock has enjoyed a 20% rise in the year to date and yesterday, Wednesday, the price was $55.50, $2 higher than Oppenheimer's price target. To use an investment term, Oppenheimer believe that Verizon's current stock price is "over stretched" and may "soften," in other words the price has gone up by too much and could reverse. For the longer term, Oppenheimer also stated that they are confident Verizon's long term wireless and fiber network will perform, but harbour worries about the short term prospects.

It is worth repeating the worries of the industry when it comes to cellular carriers trying to monetize digital content: their track record is mixed at best. Many customers simply want their carrier to provide a good quality, fast and inexpensive connection to the wider world whereas carriers want to provide customers with all manner of extras in the hope that one or more services will promote customer loyalty. Verizon Wireless is the current favourite to pick up Yahoo's core business but even if it does, there are questions as to how well the carrier can use this content. In 2015, Verizon spent $4.4 billion on AOL and has been investing considerable time and money into its existing video platform, Go90. We may have a better idea of where Verizon is positioned as next Tuesday, the carrier is due to announce its latest set of results.

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