Verizon (NYSE:) stock has really been dragging of late, with shares recently sagging below the $55 mark, and flirting with 52-week lows. The dividend yield has swelled accordingly, at 4.6% at the time of writing.
While the telecom behemoth has had its fair share of issues amid the ongoing COVID-19 crisis, it’s hard to ignore the meaningful catalysts that may be just around the corner.
Most notably, the 5G upgrade cycle is on the horizon. The main attraction to Verizon may very well be that you’ll stand to be invested alongside Warren Buffett. As of the last 13-F filing, Verizon comprises around 3% of the portfolio of Berkshire Hathaway (NYSE:) (BRK.A). A modest position. But also one that’s Berkshire’s seventh-largest.
In any case, I think Verizon stock is too cheap to pass up for income investors. As such, I am bullish on the name, despite its recent headwinds.
Verizon Showing Signs of Life
For the second quarter, Verizon showed signs of life, with much-improved customer additions (275,000 in the way of wireless postpaid phones), after exhibiting weakness in the first quarter, which was pretty much in line with expectations.
The quarter was nothing extraordinary, especially compared to the second quarter of 2020. It’s the path ahead though, that should have investors excited. Verizon is poised to profit as the next generation of mobile devices are released.
Undoubtedly, the Apple (NASDAQ:) iPhone 13 could spark meaningful growth as it coincides with a pick-up in consumer spending. Many reluctant consumers have yet to upgrade to the latest and greatest 5G network. Over the next year, as pandemic headwinds fade, things could finally align for the U.S. telecom titans.
Still, Apple looks to be a double-edged sword through the eyes of a telecom. Rumours have swirled that Apple’s next flagship device could include LEO (Low Earth Orbit) satellite connectivity, which would allow such devices the ability to text and call from outside the range of a given telecom’s coverage zone.
Could LEO Impact Demand for Verizon?
Not anytime soon. LEO connectivity is likely to be very limited upon launch, if it is, in fact, launched at Apple’s keynote on September 14. In areas where it is available, it’s unlikely to match the quality service offered by a major telecom.
Over the next 10 years and beyond, though, the answer is unclear. LEO does show some disruptive potential. In any case, I would not worry about Verizon being challenged on the mobile front, at least not anytime soon. The stock remains a relative bargain.
What I’d be more worried about is the potential impact of the BNPL (Buy Now, Pay Later) trend. Consumers may turn to the device manufacturers themselves, rather than opting to buy directly through a telecom. Regardless, Verizon stock is already so cheap that any impact is unlikely to be a major needle mover.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, VZ stock comes in as a Moderate Buy. Out of 10 analyst ratings, there are five Buy recommendations, four Hold recommendations, and one Sell recommendation.
The average VZ price target is $61.78. Analyst price targets range from a low of $50 per share, to a high of $68 per share.
Disclosure: Joey Frenette owned shares of Apple and Berkshire Hathaway at the time of publication.
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