We recently compiled a list of the 10 Best Undervalued Stocks to Buy Right Now. In this article, we are going to take a look at where Verizon Communications Inc. (NYSE:VZ) stands against the other best undervalued stocks.
As per Evercore, the equity market rally is expected to further accelerate under the Donald Trump presidency. The S&P 500 is expected to touch 6,600 by June end. This growth in the index is expected to stem from Trump’s deregulatory agency, which should fuel corporate profits. Trump is expected to act fast to enact his policies.
The investment firm went on to add that measures such as deregulation and corporate tax cuts are expected to fuel business activity and unlock significant rally in stocks. The bull market’s 2-year run stemmed from healthy growth from mega-cap technology stocks, and high valuations are expected to further rise. Evercore hinted at data demonstrating that the average bull market witnessed an increase of 152% over 50 months, while the current market saw a run-up of only 65% over the previous 25 months.
Trump’s Next Presidency- How Will It Affect US Economy?
After Donald Trump’s win, economists and market strategists have been assessing how his economic policies might affect the broader US economy and equity markets. While the initial reaction was positive, some experts opine that Trump’s plans might fuel inflation, which will hurt consumers hoping to get some respite from it. Trump’s tax plan revolves around extending the provisions in the TCJA. The provisions are yet to expire at 2025 end. These provisions consist of lowered tax brackets and expanded standard deduction.
Trump’s campaign proposed lowering the corporate tax rate to 15% from the current rate of 21%. What will be the impact on the economy? Well, the economy might initially grow moderately under Trump’s plans. That being said, the impact might fade over time, mainly because of the effect of deporting millions of immigrants, as per Oxford Economics. As per the chief U.S. economist at Oxford Economics, the real GDP might grow 0.3 percentage points higher in 2026 as compared to the situation if existing policies continue. However, in 2028, the GDP growth might eventually fall to 0.6 percentage points lower in 2028 as compared to earlier projections as a result of deportations and increased tariffs.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Inflation Under Trump’s Presidency
Consumers tend to rank inflation among their biggest economic concerns. Global economists and market strategists believe that Trump’s Presidency can reignite inflation worries. According to investing legend, Jim Rogers, Trump’s tariffs might increase domestic inflation. As a result, the US Fed will be forced to keep the interest rates high. He further added that higher tariffs on goods, commodities, and products will lead to increased global inflation.
Moreover, Trump has plans to deport millions of immigrants. This can also fuel inflation as employers will experience labor crunch, resulting in higher wages.
While there are some uncertainties regarding the potential impacts of Trump’s economic policies, market experts believe that investors can go long on stocks that remain undervalued despite the recent rally.
Our Methodology
To list the 10 Best Undervalued Stocks to Buy Right Now, we used a screener and sifted through several online rankings to extract the list of stocks trading at a forward P/E multiple of less than 15. Next, we selected the stocks which were popular among hedge funds. Finally, the stocks were ranked in the ascending order of their hedge fund sentiments, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a security analyst using a calculator, reviewing stocks.
Verizon Communications Inc. (NYSE:VZ)
Forward P/E Ratio as of 8 November: 8.55x
Number of Hedge Fund Holders: 67
Verizon Communications Inc. (NYSE:VZ) is engaged in the provision of communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities.
Verizon Communications Inc. (NYSE:VZ) continues to pursue several strategic initiatives in a bid to strengthen its market position and fuel future growth. For example, Wall Street remains optimistic about the company’s potential acquisition of Frontier Communications. This acquisition should expand Verizon Communications Inc. (NYSE:VZ)’s fiber access footprint and potentially improve its competitive position in the convergence space. Furthermore, its focus on Fixed Wireless Access (FWA) offerings should translate into a key driver of future revenue growth.
Talking about Verizon Communications Inc. (NYSE:VZ)’s broadband strategy, the company plans to double its fixed wireless subscribers to 8 million – 9 million by 2028 and further expand its fiber network to 35-40 million passings. Furthermore, the company continues to focus on increasing its Fios builds and plans to integrate Frontier’s fiber network into its operations. This will further enhance broadband access and coverage.
Verizon Communications Inc. (NYSE:VZ)’s ambitious fiber expansion strategy possesses the potential to enable significant long-term growth for the company. Wall Street believes that fiber infrastructure offers a competitive advantage in providing high-speed internet services, that are essential for both residential and business customers. This expansion is expected to result in increased revenue streams, improvement in customer retention, and opportunities for bundling services.
Moreover, a strong fiber network lays the groundwork for future technologies and services. This will open up new markets and revenue opportunities across areas including smart cities, IoT, and edge computing. Third Point Management, a New York-based investment advisor, released its Q3 2024 investor letter. Here is what the fund said:
“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.”
Overall, VZ ranks 4th on our list of the 10 best undervalued stocks to buy right now. While we acknowledge the potential of VZ as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than VZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
