Telecom & Wireless

Verizon Remains DJIA's Worst Performing Stock for 2017

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Verizon Communications Inc. (NYSE: VZ) last week saw its share price add 0.8%, but that was not enough for the telecom giant to shed its position as the worst-performing stock among the 30 equities included in the Dow Jones Industrial Average. For the year to date, Verizon’s shares are down 12.53%.

The stock price bounced around for the first four days of the week before climbing nearly 1.8% on Friday. On Thursday the company signed a $21 million deal with the National Football League to stream a single NFL game next season, and investors may have interpreted that deal as a signal of Verizon’s intention to get serious about its aspirations as a content provider.

Verizon also warned earlier last week that it would not meet its schedule for raising its credit rating by 2018 or 2019. The warning followed a report from S&P Global Ratings that the company is battling in a mature and crowded U.S. wireless market.

Now that all four major U.S. wireless carriers have unlimited data plans, the carrier business has begun a race to the bottom. Where carriers once made handsome margins on usage overage charges, these are no longer available to subscribers to the unlimited plans. Instead, Verizon and its competitors throttle the connection speed once the “unlimited” package hits a certain level.

When competitor T-Mobile reported earnings two weeks ago, the company announced that it had added more than 900,000 postpaid retail customers who had to come from somewhere. Verizon gave away 289,000 postpaid subscribers in the first quarter and AT&T lost 191,000. There’s half the T-Mobile increase right there.

Verizon countered with an offer for an unlimited data plan to its prepaid customers for $80 a month, the same price the company charges its postpaid customers. The whole idea behind prepaid subscriptions is that customers don’t need to pay for more service than they use. The prepaid unlimited plan doesn’t include some features of the postpaid plan, like high-definition video streaming or multi-line discounts. Hard to see the bargain here or why this plan will drive subscribers to Verizon instead of away from it.

Verizon stock posted a new 52-week low on Tuesday of $45.76 per share and matched it again on Thursday. The stock’s 52-week high is $56.95, and the 12-month consensus price target is $50.52. The company’s dividend yield ended the week unchanged at 5.03%.

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