Nearly halfway into 2020, Verizon’s stock is trading in the red but its decline started before the full magnitude of the Covid-19 pandemic was known. The stock opened the year just above $61 per share and was around $58 per share by the end of the month. As the pandemic was felt across the entire stock market, Verizon’s stock fell as low as $48.84 before recovering to around the $55 per level.
Verizon’s stock also traded below $50 per share in early 2016, which implies that investors who have held the stock for four years have seen zero appreciation. Granted, the stock has been paying a dividend over the years, but total underperformance versus the Dow Jones Industrial Average Index is quite notable.
This begs the question: is Verizon stock a good investment at current levels? Let’s take a look at some of the more notable 2020 Verizon share news that sets the tone for any Verizon stock outlook.
Trade Verizon Communications Inc - VZ CFD
Verizon share price forecast dictated by 5G optimism
Any Verizon stock price forecast must focus on the development of its 5G network. As a reminder, 5G is the fifth generation of mobile networks that will replace the current 5G LTE network; 5G will be substantially faster with peak data speeds of up to 100Mbps.
5G technology and infrastructure R&D date back at least 10 years, but 2019 marked the first time it was put into use. Verizon deserves the bragging rights for being the first telecom company in the world to launch a commercial 5G mobile network in Chicago and Minneapolis.
Should I invest in Verizon stock based on its early 5G lead? The short answer is no, because rivals will catch up – eventually. 5G will power many next-generation technologies, including self-driving and autonomous cars, so it goes without saying that 5G will be here to stay for a long time and provides a great opportunity for early investors today.
Over the short term, Verizon share price forecast 2020 is likely to move on any new updates. The company is laying out the framework for what could prove to be a busy end to 2020 in 5G updates. Most notably, the company introduced in early February a new 5G compatible Galaxy S20 smartphone and followed up in April with a more affordable alternative, the OnePlus 8 5G UW.
Investors may be treated to updates in subsequent earnings releases, which confirm an early success and potential first-mover advantage in the new 5G era. But if the Covid-19 pandemic dampens short-term sales, investors can have greater confidence in the long-term story that could last many years, if not decades.
Verizon reported first-quarter results on April 24, highlighted by a year-on-year drop in revenue and EPS. This shouldn’t come as much of a surprise given the global pandemic impacted nearly every business of all shapes and sizes.
But a key takeaway from the report answers the question: will Verizon stock go up over the longer-term when the pandemic is brought under control or eradicated? Management said in the report it has taken action to “serve our stakeholders in the long term”. Some of the actions include investing in its workers, maintaining the network quality and reliability, servicing customers and supporting communities.
Encouragingly, Verizon appears to be confident enough in its outlook to proceed with prior plans to spend $17.5bn to $18.5bn in its business, most notably in 5G which is a key catalyst to support a rising Verizon stock price forecast.
Not the time to pause acquisitions
The global pandemic isn’t going to prevent Verizon from continuing its growth through acquisitions. On April 16, Verizon said it agreed to acquire BlueJeans Network, a provider of a cloud-based video service that serves small organisations to some of the largest multinational brands.
While the acquisition seems to be a play on the stay-at-home phenomenon, Verizon has much larger ambitions which could serve as a reason why is Verizon stock going up. The logic behind the deal is to combine the BlueJeans meeting platform with Verizon’s unified communications as a service business.
Verizon plans to deeply integrate BlueJeans in its eventual 5G product lineup which can best serve high-growth areas such as telemedicine, distance learning, and field service work.
Shareholder friendly actions
Management’s commitment to driving shareholder value through dividends and share buybacks remains unchanged in 2020. Despite a challenging environment brought on by the Covid-19 pandemic, Verizon’s board of directors felt it prudent to pay investors on May 1, 2020 a quarterly dividend of 61.50 cents per share, which represents an attractive yield of around 4 per cent. The dividend follows more than $10bn paid to investors in 2019.
Based on dividends alone, should investors buy or sell Verizon stock? Income orientated investors should have confidence in the company’s ability to maintain its payments throughout 2020. One key factor in supporting Verizon’s ability to continue paying investors is the simple reality that the vast majority of people both want and need to have a cell phone.
Gone are the days when monthly cell phone bills are discretionary expenses. The surge in popularity of social media, photo sharing, video streaming, gaming, and much more implies consumers will prioritise cell phone bills over other expenses.
Sure, many are likely to lower their data allocations or buy cheaper phones, but the company’s cash flow generation backed by its cash on hand and ability to tap the debt market bodes well for Verizon stock predictions.
Bottom line: good buy at $55
Finally, let’s conclude with VZ stock analysis by looking at Verizon’s one-year share price chart to examine the best entry points.
First, the one-year chart makes it clear the stock established a resistance level between $50 per share and $55 per share. At these levels, investors appear to believe Verizon’s stock has no more downside potential and the higher dividend yield is lucrative to longer-term investors.
On the other hand, the stock tried on several occasions to trade above $60 per share but, like clockwork, the stock lost any momentum and sold off. Near-term swing investors may want to exit the stock at these levels for any short-term gain, but long-term investors may need to wait a while for 5G momentum to really kick in over the coming years.
Stay tuned to the latest stock market news, which can drive Verizon price movement. Follow the VZ stock price chart live and spot the best opportunity to open a trade with Capital.com.