On Feb. 17, Verizon (VZ) stock was up 4.1 percent at $56.33 in the pre-market trading session. The shares of the telecommunications giant were up significantly after Warren Buffett’s Berkshire Hathaway disclosed a big stake in Verizon. However, Verizon stock is down about 8 percent YTD and has lost 7 percent over the last year. What’s the forecast for VZ stock in 2021? Should investors buy the stock?
Verizon is a U.S. wireless and wireline telecom services company that provides communication services to enterprises and consumers. The company is the second-largest wireless service provider in the U.S. with 120.3 million customers at the end of the third quarter of 2020. Verizon faces competition from AT&T and T-Mobile.
Warren Buffett buys Verizon stock
On Feb. 16, Warren Buffett’s Berkshire Hathaway revealed a sizeable stake in Verizon, after previously being allowed to keep the holding confidential. As of December 31, 2020, Berkshire Hathaway owned 146.7 million Verizon shares worth $8.6 billion. The Verizon stockholding is up significantly from the end of the third quarter of 2020 when Berkshire Hathaway owned 58.4 million Verizon shares worth $3.4 billion.
Verizon’s stock price forecast
According to estimates compiled by CNN, analysts' median target price is $60 for Verizon, which is 10.8 percent above its current stock price. Among the 27 analysts tracking Verizon, 10 recommend a buy, 16 recommend a hold, and one recommends a sell. The highest target price of $70 is 29.2 percent above the stock's current price, while the lowest target price of $45 is 16.9 percent below the stock's current price.
Is Verizon a good play on 5G?
The 5G wireless network is expected to provide faster data speeds to consumer devices. According to Verizon CEO Hans Vestberg, the telecom company met or exceeded all of its 5G commitments in 2020. The wireless carrier plans to build out the 5G network at a similar pace in 2021. Currently, Verizon’s mmWave 5G service is available in parts of 64 U.S. cities. The company aims to almost double that by the end of this year. The global 5G services market is on course to grow to $414.5 billion in 2027 from $41.5 billion in 2020.
Berkshire Hathaway initiated positions in:— Dividend Growth Investor (@DividendGrowth) February 16, 2021
- Verizon $VZ
- Chevron $CVX
- Marsh & McLennan $MMC
They added to:
- Kroger $KR
- Abbvie $ABBV
- Bristol Myers Squibb $BMY
Sells all of:
- JP Morgan $JPM
- M&T Bank $MTB
- Pfizer $PFE
- Barrick $GOLD
Trimmed Apple $AAPL and $WFC
Verizon stock looks like a buy
Verizon stock looks like a buy for growth and income investors. Investors who want cash dividends, stability, and stock price appreciation will mainly get all three of these attributes in Verizon stock. Verizon trades at an NTM (next-12-month) PE multiple of about 10.9x. In comparison, T-Mobile and AT&T are trading at NTM PE multiples of 53.4x and 9.2x, respectively.
On Feb. 17, Verizon’s dividend yield was 4.6 percent. The company has increased its dividend for the past 13 consecutive years. Verizon is raising its dividend by an average of 2.15 percent each year. The company pays out about 52 percent of its earnings as a dividend.
Wall Street analysts expect Verizon’s profitability to improve. Its EPS is expected to come in at $5.08 in 2021 compared to $4.90 in 2020. The higher EPS is partially due to its increasing revenues. Analysts expect Verizon's revenues to rise by 3.8 percent in 2021 compared to a decline of 2.7 percent for 2020.
In 2020, Verizon reported a wireless retail postpaid phone churn rate of 0.72 percent compared to 0.82 percent in 2019. The company added 667,000 retail postpaid phone net customers in 2020.