Categories AlphaGraphs, Earnings, LATEST, Technology

Verizon slips after Citi downgrades stock citing wireless pricing headwinds

Shares of Verizon (NYSE: VZ), the second largest telecom company in the US, declined early Monday after Citi downgraded the stock to neutral from buy while retaining the price target at $62. The impact of the rating action on investors’ sentiment was moderate because the brokerage maintained its positive outlook on the company’s second-quarter report, which is due on August 1.

Announcing the revised rating, Citi cautioned that Verizon might find difficulty in maintaining the current momentum if it restricts its focus and growth initiatives to the wireless category.

Related: Verizon Q1 2019 Earnings Conference Call Transcript

The changed operating conditions in the telecom industry, which is witnessing a consolidation wave, will continue to set new equations in terms of pricing and competition. The emerging scenario will also give rise to new risks, prompting investors to be more cautious while dealing in telecom stocks.

The main challenge facing legacy telecom firms like Verizon will be diminishing expansion opportunities and pricing freedom in the wireless space, especially in the wake of the proposed mega-merger between T-Mobile (TMUS) and Sprint (S). New competitors with better pricing power will add to the problem, leveraging the declining establishment costs due to technological advancements. The analyst is of the view that telecommunication companies could be entering an era of low margins.

Also see: AT&T Q1 2019 Earnings Conference Call Transcript

The research firm went one step further and recommended that Verizon’s management should consider acquiring Dish Network (DISH) so that it can use the latter’s expansive wireless spectrum to scale up growth.

In the first quarter, Verizon’s earnings rose 3% to $1.20 per share and topped the Street View. Though revenues rose modestly to $32 billion, they missed the estimates.

Verizon shares made steady gains in the last twelve months and have been hovering near the record highs seen about two decades ago. The stock, which has moved up 13% since the beginning of the year, lost about 1% in Monday’s early trading hours.

Follow our Google News edition to get the latest stock market, earnings and financial news at your fingertips

Most Popular

Does Unity Software (U) stock has more room to run?

Last month, the IPO market was in a full swing. IPOs of Snowflake (NYSE: SNOW) and JFROG (NASDAQ: FROG) had an impressive opening day in September, the former creating a

PepsiCo (PEP): Steady snacking habits amid pandemic drive strong quarter for beverage giant

PepsiCo Inc. (NASDAQ: PEP) beat market expectations on both revenue and earnings for the third quarter of 2020. The company saw the momentum continue in its snacks business while the

Does the virus-driven boom make Electronic Arts (EA) a good investment?

With more and more people turning to virtual entertainment sources, amid the virus-related movement restrictions, video game publishers like Electronic Arts (NASDAQ: EA) are witnessing unusually high demand. Not surprisingly,

One thought on “Verizon slips after Citi downgrades stock citing wireless pricing headwinds

Comments are closed.


Add Comment
Viewing Highlight