- Morgan Stanley analyst Simon Flannery highlights that Verizon Communications Inc's VZ (reiterated Equal Weight, price target $58) stock has fallen 15% this year and is now trading at a stock price not seen since 2017.
- He notes that the dividend yield now stands at 5.8%, suitable for #10 in the S&P 500.
- Simon points out that capex will likely peak this year and drop 25% or $5.5 billion over the next two years.
- Also Read: Analyst Downgrades Verizon Calling It A Bigger Loser Compared To AT&T, Cuts Price Target By 26%
- He adds that this should help the company delever and move closer to the 2.25x unsecured leverage level where buybacks may kick in.
- While he thinks the stock is inexpensive, he remains on the sidelines as he does not see a solid catalyst to drive a re-rating in the near term.
- Simon also notes that the company cut guidance in Q1 and again in Q2, driving the stock lower.
- Simon will focus if there will be a reiteration of 2022 guidance with 3Q22 earnings and whether Verizon can improve gross and net adds trends and better visibility into 2023/24+.
- Macro still matters, and so does potential buyback.
- Price Action: VZ shares traded higher by 0.23% at $43.56 on the last check Wednesday.
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