Verizon VZ stock declined after management suggested on March 11 that wireless competition was more aggressive than usual during the first quarter. But we think the news is just a small bump in the road for a couple of reasons. First, Verizon reiterated its full-year forecast for customer additions, growth, and profitability. Second, we argue that using promotions to gain market share over the long term is futile. As a result, we think this high-dividend stock looks attractive for income-seekers, as it trades well below our $53 fair value estimate. Verizon is also among chief US market strategist Dave Sekera’s 4 Stocks to Buy During Tariff Uncertainty.
Verizon is primarily focused on the wireless business, where it has taken steps to ensure it remains well positioned, building fiber deeper into major metro areas and acquiring wireless spectrum to increase network capacity and performance. It has long prided itself on network quality, consistently investing in wireless and fixed-line technology. Verizon has built its brand reputation around these networks, attracting a large and loyal customer base. In the wireless business, the firm holds roughly 40% of the US postpaid phone market, about a third greater than AT&T T or T-Mobile TMUS. Leading scale enables Verizon to generate the highest margins and returns on capital in the industry.
Key Morningstar Metrics for Verizon
- Fair Value Estimate: $53
- Star Rating: 4 Stars
- Economic Moat Rating: Narrow
- Uncertainty Rating: Medium
Economic Moat Rating
Verizon’s narrow moat stems from cost advantages in its wireless business and the industry’s efficient scale characteristics. Verizon has organized its business along customer lines, but we believe it is best understood along wireless and fixed-line dimensions. The wireless business produces about 70% of service revenue but contributes nearly all of Verizon’s profits. We estimate wireless returns on invested capital were about 16% prior to 2021. Heavy investment to acquire additional spectrum in the C-band auction and subsequent spending to put that spectrum to use have pulled wireless returns on capital to the low double digits by our estimate, still leaving Verizon ahead of its cost of capital.
Read more about Verizon’s moat rating.
Fair Value Estimate for Verizon Stock
Our fair value estimate is $53 per share. We expect about 3% average annual wireless service revenue growth over 2024-28. We expect consumer fixed-line revenue will grow 1% annually through 2028 as Fios continues to attract broadband customers and pricing power remains strong. Offsetting this growth, the television and phone businesses will likely continue to decline. We believe the fixed-line business services segment can return to growth over the next several years. We expect consolidated adjusted EBITDA margin will hold roughly flat over the next five years at about 35%. We assume that annual capital spending will move above $19 billion by 2028 as Verizon is likely to invest aggressively in fiber in the coming years.
Read more about Verizon’s fair value estimate.
Risk and Uncertainty
Verizon primarily faces regulatory and technological uncertainties. If its services are deemed insufficient or overpriced, regulators or politicians could step in. Media reports have highlighted potential risks related to lead-sheathed cables commonly deployed in telecom networks into the 1960s. The liabilities and costs associated with removing these cables, if deemed necessary, are unknown today. A flood of new spectrum could drive down prices, easing entry into the wireless business. Technology could eventually lower barriers to entry for firms that have long wanted to enter the business; the large cable companies have already deployed Wi-Fi throughout their networks to provide limited wireless coverage.
Read more about Verizon’s risk and uncertainty.
Verizon Bulls Say
A focus on network strength over the past 15 years has put Verizon in an enviable position. Its wireless network provides the broadest coverage in the industry, and its reputation with customers is sterling.
With the largest customer base in the US, Verizon Wireless is the most efficient carrier in the industry, delivering far better profitability than its rivals.
Verizon is relentlessly pushing forward in its core business, expanding its fiber-optic network and deploying 5G wireless technology.
Verizon Bears Say
Wireless technology is dramatically lowering the cost to build and maintain a network. Rival carriers have rapidly deployed new spectrum and technology to add coverage and capacity. Verizon’s network leadership is a thing of the past.
Verizon’s fixed-line business is a disaster, earning minimal profits and facing years of high costs necessary to support declining revenue.
Verizon’s balance sheet isn’t the fortress it once was. Paying down debt will limit strategic flexibility and shareholder returns. Liabilities tied to lead-sheathed cable could add another headache.
This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of March 12, 2025.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
