10. Verizon Communications Inc. (NYSE:VZ)
Forward Price-to-Earnings Ratio as of March 4: 9.23
Number of Hedge Fund Holders: 74
Verizon Communications Inc. (NYSE:VZ) is a global telecommunications leader that offers an array of communication, technology, information, and entertainment services. Through its Consumer and Business segments, it provides wireless and wireline services. These include mobile, broadband, fiber-optic connectivity, and enterprise solutions. It caters to individuals, businesses, and government entities.
The company is currently focused on its “AI Connect” initiative. It provides the infrastructure and connectivity solutions needed for businesses to deploy and utilize AI workloads. The company is pursuing it to capitalize on the growing AI infrastructure market, which is projected to see over $1 trillion in investments in the next decade. The initiative uses the company’s existing fiber network and edge computing capabilities. It already has a $1 billion deal funnel as of Q4 2024, with major players like Google and Meta using Verizon Communications Inc.’s (NYSE:VZ) network for AI workloads.
On January 27, Bernstein analysts decreased their price target for Verizon Communications Inc. (NYSE:VZ) from $48 to $46, while reaffirming a Market Perform rating. This adjustment came despite recognizing the company’s strong 2024 performance, which was characterized by growth in postpaid and fixed wireless access (FWA) subscribers, particularly in Q4 2024. It made an overall revenue of $35.68 billion in Q4, which represented a 1.57% year-over-year improvement.
Third Point Management sees Verizon Communications Inc.’s (NYSE:VZ) acquisition of Frontier Communications as a strategic move that validates the value of high-end fiber networks and positively impacts the telecom sector. It stated the following in its Q3 2024 investor letter:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”