Analysts at Wells Fargo have upgraded Verizon's shares outlook despite a less than stellar performance by the carrier for the 2017 fiscal year. More directly, the financial institution has pushed the service provider's target price up by around 4.1-percent – from $48 to $50. That's based on an expectation that Verizon will see annual service growth by quarter three of next year, following a service revenue increase over the prior twelve quarters. The increases in revenue, meanwhile, have been in spite of the fact that, over the course of the year, from mid-January, the company has seen its shares drop by 16-percent. Those decreases primarily stemmed from the fact that the company reported that it would not see a return to overall annual service growth in 2017. The company also suffered relatively flat revenue for Q3 2017, a 2.4-percent decrease in total revenue for 2017, and service revenue decreases of around 5.1-percent.
Analysts from Wells Fargo point to Verizon's increased spending on fiber initiatives, in addition to its efforts in preparing for the incoming next-generation mobile networks – namely 5G. Beyond that, the organization says that "the math" supports the improved outlook – which the company states will outperform market expectations. In fact, shares have already seen a moderate increase during pre-market trading, although that doesn't necessarily indicate an uptick in share prices in the market. With that said, Wells Fargo also forecasts a market underappreciation for Verizon's continued Fiber One efforts. However, the expected moderate increase in capital expenditures is expected to result in a substantial improvement in the carrier's cost-effectiveness – in terms of both "lower backhaul" and "access costs." That, in turn, lends to Wells Fargo's prediction that the service provider is headed for a turnaround with regard to annual service growth.
Whether the expectations of Wells Fargo for Verizon turn out to be accurate remains to be seen. However, the company has spent a substantial amount over the past year, including acquiring smaller fiber operators in order to expand and increase the density of its own fiber networks. Bearing that in mind, it does make some sense that the expenditures of the company over the past several months strengthening its own network and readying for 5G networks will eventually bear fruit.