Verizon Fiber Network Gains Traction: Will VZ Stock Benefit?

Verizon Communications Inc. VZ has unveiled plans to expand its high-speed fiber broadband connection in Jamestown and Westerly in Rhode Island to foster digital inclusion and bridge the urban-rural digital divide. The expansion will be funded by the American Rescue Plan Act (ARPA) and aims to deliver fast, fiber broadband service to residents in underserved areas of the state. The deployment of the 100% fiber network will enable customers to enjoy award-winning Fios broadband service at attractive monthly plans and reinforces Verizon’s commitment to expanding its fiber optics networks to support 4G LTE and 5G wireless standards as well as wireline connections across the country.VZ Focusing on Fiber Network DeploymentVerizon remains focused on making necessary capital expenditures due to the continued expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to cater to huge traffic demands across multiple verticals and the continued deployment of the fiber infrastructure.The company recently entered into a definitive agreement to acquire Frontier Communications Parent, Inc. FYBR, the largest pure-play fiber provider in the United States. The deal, worth approximately $20 billion of enterprise value, aims to expand Verizon’s fiber footprint nationwide and accelerate its delivery of premium mobility and broadband services to current and new customers.Post-acquisition, Verizon will integrate Frontier’s state-of-the-art fiber network within its Fios network to boost its industry-leading portfolio of fiber and wireless assets. Additionally, the combination of Frontier’s premium broadband with Verizon’s premium mobile offering is anticipated to improve the customer churn rate by approximately 50% for postpaid mobility. This, in turn, is likely to boost the revenues of the mobility division. Verizon further expects to achieve a minimum of $500 million in run-rate cost synergies by the third year, backed by the increased scale, distribution and network integration.Wireless Broadband Momentum: VZ’s Key Growth DriverVerizon is witnessing significant 5G adoption and fixed wireless broadband momentum with premium unlimited plans. The telecom giant plans to accelerate the availability of its 5G Ultra Wideband network across the country. The company’s growth strategy includes 5G mobility, nationwide broadband and mobile edge compute and business solutions. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These are massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.VZ’s Price PerformanceVerizon has gained 16.3% year to date compared with the industry’s growth of 25.8%. Despite lagging peers like AT&T Inc. T and T-Mobile US Inc. TMUS, the stock appears poised to gain from customer-focused planning, disciplined engineering and steady infrastructure investments.In addition, Verizon is likely to benefit from the deployment of a cloud-native, container-based, virtualized architecture for higher flexibility, scalability and cost efficiency across its network. The various mix-and-match pricing plans for wireless and home broadband have further led to solid customer additions.YTD Price Performance Image Source: Zacks Investment ResearchMargin Woes, Eroding Legacy Services: VZ’s HeadwindsDespite solid wireless traction, Verizon is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines as a result of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. Moreover, to expand its customer base, Verizon is spending heavily on promotion and offering lucrative discounts, which are weighing on margins and adversely impacting its bottom line.VZ also recorded high capital expenditures 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. The company operates in a competitive and almost saturated U.S. wireless market. Spectrum crunch has become a major issue in the U.S. telecom industry. Most carriers are finding it increasingly challenging to manage mobile data traffic, which is growing by leaps and bounds. The situation has become even more acute with the growing popularity of iPhone and Android smartphones as well as rising online mobile video streaming, cloud computing and video conferencing services.Image Source: Zacks Investment ResearchEstimate Revision Trend of VZEarnings estimates for Verizon for 2024 have moved down 1.5% to $4.58 over the past year, while the same for 2025 has declined 2.1% to $4.70. The negative estimate revision depicts bearish sentiments for the stock.Image Source: Zacks Investment ResearchEnd NoteBy investing steadily in fiber infrastructure and pioneering new technologies, Verizon is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid subscriber growth, higher average revenue per user and increased broadband and fiber penetration.However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. With a Zacks Rank #3 (Hold), Verizon appears to be treading in the middle of the road, and 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.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>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 Report Frontier Communications Parent, Inc. (FYBR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks