What Are the Value Propositions of AT&T and Verizon?

In the earlier parts of this series, we looked at some updates for Verizon (VZ). Now, we’ll look at AT&T (T) and Verizon’s value proposition among select global telecom titans. The biggest global telecom company by market capitalization was AT&T as of June 22, 2016. As of the same date, Verizon was the third-largest global telecom company by market capitalization, before China Mobile (CHL).

Now, let’s look at AT&T and Verizon’s earnings multiple and those of select global telecom players. AT&T was trading at a next year PE (price-to-earnings) multiple of ~13.7x on June 22, 2016, which is higher than Verizon’s PE of ~13.4x. In the global telecom space, the same metrics for Telefonica (TEF) and Deutsche Telekom (DTEGY) were ~11.9x and ~14.5x, respectively, as of June 22, 2016.

Now, let’s look at AT&T and Verizon’s EV (or enterprise value) multiples compared to its peers. AT&T’s next year EV-to-EBITDA (earnings before interest, tax, depreciation, and amortization) multiple was ~6.7x as of June 22, 2016, which is lower than Verizon’s ~7x.

Among the global telecom majors, the same figures for Vodafone (VOD) and Telefonica were ~7x and ~7.1x, respectively, as of June 22, 2016.

Instead of direct exposure to Verizon’s stock, you can consider getting diversified exposure to the company by investing in the SPDR Dow Jones Industrial Average ETF (DIA). The telecom giant made up ~2% of the ETF at the end of May 2016.