Telecom & Wireless

Verizon Is the DJIA's Worst Performing Stock for 2017

Paul Ausick

Published: February 4, 2017 9:25 am

Last Updated: January 12, 2020 3:10 pm

Dow Jones Industrial Average component Verizon Communications Inc. (NYSE: VZ) is not having a good start to the year. The company’s stock has lost 8.99% of its value since the beginning of January. Compared with the prior week, Verizon dropped nearly 2% just last week.

When it reported quarterly results two weeks ago, the company forecast 2017 revenue flat on an organic basis, but that does not include divestitures of some assets and the still-pending acquisition of Yahoo. Verizon also missed both quarterly and full-year earnings and revenues estimates when it reported earnings.

Overall, Verizon experienced a worse earnings reaction than we have seen in recent memory, falling 4.4% immediately after reporting results. Verizon was downgraded to Market Perform from Outperform with a $52 target price at FBR Capital Markets. Argus maintained its Buy rating and $60 target price on Verizon.

Jefferies maintained the stock as Hold, but lowered its price target from $53 to $51 and noted:

Results were indicative of the highly promotional fourth quarter, highlighted by an aggressive iPhone 7 promotion. While handset additions were positive, margins paid a steep price. ARPA and churn also disappointed. In our view, investors will be disappointed with guidance that implies only 1% EPS growth, well below expectations and prior commentary, driven primarily by expected continued ARPA pressures.

On the upside, Verizon’s 4.78% dividend yield keeps investors and analysts in the stock, as does demand for more and more data by the company’s customers. On the downside, the U.S. wireless market is saturated and subscriber growth depends on stealing customers from competitors, a move that generally involves price promotions.

Verizon’s stock closed up about 0.6% on Friday, at $48.58 in a 52-week range of $46.01 to $56.95. The consensus price target is $52.23.