Verizon Outpaces Its Industry in a Year: How to Play the Stock?

Verizon Communications Inc. VZ has gained 4.4% in the past year against the Wireless National industry’s decline of 1.7%. The stock has underperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.Image Source: Zacks Investment ResearchShares of the company have outperformed its competitor, T-Mobile US, Inc. TMUS, but underperformed AT&T, Inc. T. Shares of AT&T have returned 9.3% while T-Mobile has declined 8.1% during this period.Verizon Set to Gain From Network Upgrades, 5G InnovationEnterprises globally have been undertaking rapid digital transformation across their operations. Several factors are driving this transformation. Businesses are opting for hybrid or remote work models, transitioning to cloud and distributed workloads and automation. This requires robust and consistent connectivity.Per a report from Grand View Research, the 5G infrastructure market is expected to witness a 13.1% compound annual growth rate between 2026 and 2033, whereas the 5G services market is expected to witness a 62.2% CAGR between 2025 and 2030. Verizon is steadily augmenting its 5G portfolio and investing in network upgrades to capitalize on these emerging market trends.Verizon has inked a multi-year agreement with Array Digital, a leading provider of network towers across the U.S. Array boasts 4,400 towers across the country, enabling 5G and other wireless services. Access to these tower sites enhances Verizon’s 5G network, ensures cost efficiency and also makes it easier for Verizon to deploy advanced wireless technologies. Verizon also launched 5G Network Slice - Enhanced Internet. A leading-edge fixed wireless internet solution that gives customers supercharged uplink capacity, high performance, with no data caps. The new 5G network slicing product offers 200 Mbps downlink and 45 Mbps uplink without data caps. The solution ensures reliable data transmission for AI inference models, computer vision, and machine learning applications. With such advanced capabilities, Verizon’s new solutions are expected to gain traction in several sectors such as logistics, public safety and others.Verizon’s effort to expand into other high-growth markets, other than legacy telecom services, is a positive. The company is collaborating with Kodiak AI to modernize the trucking industry by combining autonomous driving technology with advanced IoT and 5G connectivity. Such initiatives bode well for long-term growth.Major Challenges for VZVerizon faces fierce competition from T-Mobile and AT&T across several verticals. The U.S. wireless market is highly saturated with all the major telecom operators covering more than 300 million people. The only way one can expand its customer base its by taking away users from others. This makes the market highly price sensitive and raises the customer acquisition costs. Verizon often has to give discounts and run promotional activities to retain its users. This puts pressure on the margin. The company recorded high capital expenditures in order to support the launch and continued build-out of its 5G Ultra Wideband network, deployment of significant fiber assets across the country and upgrade to Intelligent Edge Network architecture. It remains unclear if and when a reasonable return can be achieved from such investments.Moreover, the company is affected by high debt obligations. Managing the increasing customer retention expenses, while investing in network upgrades and generating sustained return on investment for investors amid a high debt burden, is a challenging task.Estimate Revision Trend of VZEarnings estimates for 2025 have declined 0.43% to $4.68 over the past 60 days, while the same for 2026 have declined 1.02% to $4.83.Image Source: Zacks Investment ResearchKey Valuation Metric of VZFrom a valuation standpoint, VZ appears to be trading relatively cheaper compared to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 8.4 forward earnings, lower than 11.55 for the industry.Image Source: Zacks Investment ResearchEnd NoteVerizon’s effort to expand its 5G portfolio to capitalize on the next wave of 5G adoption is a positive. The introduction of innovative solutions such as network slicing will boost prospects in multiple sectors. Strategic collaboration with Array Digital will streamline the 5G and other wireless services expansion process. This will likely bring long-term benefits.However, the company is affected by stiff competition in the industry. High debt burden, combined with higher user retention costs, is limiting investment in growth initiatives and putting pressure on profitability. Downward estimate revision highlights investors’ growing skepticism on stock’s growth potential. With a Zacks Rank #3 (Hold), VZ appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AT&T Inc. (T): Free Stock Analysis Report Verizon Communications Inc. (VZ): Free Stock Analysis Report T-Mobile US, Inc. (TMUS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks