Editor’s note: This article has been corrected. Verizon is scheduled to report earnings on Oct. 29.
Verizon Communications.(NYSE: VZ) i just can’t catch a break. Although the telecom giant’s stock offers a strong yield and the valuation appears low, investors have been bearish in recent years. And this year, while the overall market has risen, stocks have remained flat. The company recently made a big move by replacing the CEO, but that only sent the stock down.
Meanwhile, Verizon reports its third-quarter earnings on Oct. 29. With some big news and a lot of attention on the business lately, low valuation and earnings, is now the time to finally buy this struggling stock?
Image source: Getty Images.
When it comes to Verizon’s business, there’s usually a lot of predictability and long-term stability. Customers regularly rely on its online services, resulting in high recurring revenue. There may be some downs along the way, but this is not a business where you expect massive growth.
Its historical price movements on the earnings day reflect this pattern. From 2024 the stock has largely remained in a tight range, generally hovering between $40 and $45.
VZ data by YCharts.
While an earnings report can sometimes cause a stock to fall or rise sharply, that hasn’t usually been the case for Verizon. The stock recently made a big move, but that was due to a change in management.
October 6 Verizon announced that the former PayPal CEO Dan Schulman would now be its leader. Schulman takes over from Hans Vestberg, who has been in charge since 2018. The move surprised investors and the stock suffered one of its biggest declines in a year, falling just over 5%.
The company’s stock has fallen more than 30% in five years, and its board could be looking for a way to turn things around. Meanwhile, investors may question such a big and unexpected move so close to an upcoming earnings report. Many have probably been dumping stocks in anticipation of some worrisome results this quarter.
But in a press release announcing the CEO’s move, management said Schulman was simply “the right leader to guide Verizon’s next phase of greater customer focus and financial growth.”
The company has been generating only modest single-digit growth lately. But with the economy far from ideal and consumers cutting back on discretionary purchases like new phone upgrades, there may not be a quick or easy way to improve its growth rate without cutting prices and sacrificing margins.
Verizon is struggling at a time I’d expect it to – when the economy isn’t strong. However, telecommunications provides products and services that businesses and consumers need every day and is a stable business to invest in. It also generates a strong profit margin of around 13% and offers an attractive dividend yield of just under 7%.
While I don’t expect the stock to skyrocket after it reports earnings, I think now might be a great time to invest in it given its depressed valuation. It trades at a price-to-earnings multiple that is slightly higher than 9 (in comparison, S&P 500 the average is greater than 25).
Although Verizon is facing some challenges these days, in the long run, this leading telecommunications provider could still be a great investment that will generate income for years to come.
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David Jagielskis has no positions in any of the mentioned shares. The Motley Fool has a position and recommends PayPal. The Motley Fool recommends Verizon Communications and recommends the following options: Long 2027 January $42.50 PayPal calls and short 2025 in december $75 calls on PayPal. The Motley Fool has a disclosure policy.
Should You Buy Verizon Communications Stock Before Oct. 29? originally published by The Motley Fool.
