2. CURRENT
POSITION
TICKER: VZ
SECTOR: Telecommunication
INDUSTRY: Service
CURRENT PRICE: $50.50(As of 02/05/2018)
AVERAGE SHARES TRADED PER YEAR:
16,963,822
WEIGHT IN PORTFOLIO: 1.35%
CURRENT TARGET PRICE: $ 44.18
MARKET CAPITALIZATION: $215901million
RECOMMENDATION: Hold
3. COMPANY BACKGROUND:
• Verizon stands as the number 1 telecom carrier in The United States of
America.
• Segments of company includes Ad market, media, technological solutions.
• Subsidiary of Verizon started as an umbrella for its digital contents AOL
and Yahoo.
• Core business segments of the company- Wireline and wireless.
Source: Bloomberg
5. MERGERS AND ACQUISITIONS:
Verizon merged with an European telematics with Movildata purchase.
Verizon acquires Niddel to add security detection for business customers.
Verizon purchased fiber network infrastructure from WideOpenWest in
Chicago market- for the development of wireless sites with the help of fiber
and small cells.
Verizon concentrating in 5G deployment. As a result acquired Straight Path
Spectrum to accelerate 5G.
Source: http://www.verizon.com/about/news-tag/mergers-acquisitions
6. FINANCIAL NEWS:
• Currently struggling with decline in revenue in the
wireless segment due to market saturation.
• Pooled all assets under a new subsidiary called Oath.
• According to 4Q, revenue is slightly ahead of
estimates while EPS fell short.
• Revenue in the core business segments fell in the
past quarters.
• Oath is expected to offset the slowdown of revenue.
Source: Bloomberg
7. •Oath revenue ($2.2. billion) in fourth quarter is 10% more
than the third quarter in 2017.
•Postpaid additions have increased in the 4th quarter( $
431000) from $274000 in the 3rd quarter because of the
unlimited plans.
•Verizon Fios total revenue grew 2.3% from the last quarter
due to internet customer growth.
•Telematics revenue is $ 230 million in the 4th quarter of
2017.
•IOT revenue increased 17% over year.
FINANCIAL NEWS
8. FINANCIAL ANALYSIS:
Price ratios:
P/E ratio- 14.3
P/S ratio – 1.7
P/B ratio – 5.1
P/CF ratio – 27.1
Dividends:
Dividend yield – 4.4%
Dividend payout ratio – 31.6
Revenue:
Operating revenue(full year)- $126 billion(2017)
2% less than 2016
Operating revenue(4Q) - $34 billion(2017)
5% more than 4Q 2016
SOURCE: BLOOMBERG
15. • Heavy debts.
•Negative cash flow.
•International players are a
threat.
THREATS
• Largest telecom provider.
• New healthy investments.
STRENGTH
• Regional player.
• Premium prices.
• High cost of infrastructure.
WEAKNESS
• International expansion.
• Greater internet usage.
OPPORTUNITIES
17. SINGLE STAGE DDM MODEL
CURRENT DIVIDEND $2.34
RATE OF RETURN 8.46%
LONG TERM GROWTH RATE 3%
INTRINSIC VALUE $41.50
REQUIRED RATE OF RETURN
RISK FREE RATE 2.84%
MARKET RETURN 10.13%
COUNTRY RISK PREMIUM 7.29%
BETA 0.77
EQUITY RISK PREMIUM 5.62%
RATE OF RETURN(CAPM) 8.46%