The folks over at Citigroup love Verizon (VZ). They upgraded it all the way from "sell" to "buy" and moved their price target from $33 to $48. Since the stock trades at $42, that seems like a bizarre move, but why keep looking stupid for another day.
The reason for the upgrade is that the bank thinks the drop in Verizon’s landline business may come to an end soon and that margins at its wireless business should get better.
The premise of the upgrade is probably wrong. There seems to be little reason to believe that cable companies will not continue to take wireline business with their VoIP products. Comcast (CMCSA) added over 500,000 of these customers last quarter. Then there is the issue of Verizon’s fiber-to-the-home product. It will have to do extremely well to offset that company’s $23 billion investment. And, it is still not clear why consumers would switch from bundled cable services with broadband, TV, and voice to a similar product from the telephone companies.
Citi probably knows all that, but what can investors expect from analysis that had a price target at $33 when the stock was trading at $42. A little slow off the mark.
Douglas A. McIntyre
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