VZ: Wireless Spectrum Deal And Incoming CEO Will Drive Future Market Position

Key Takeaways

• Rapid broadband and 5G expansion, alongside enterprise digital solutions, position Verizon to benefit from rising connectivity demand and support higher revenue per user.
  
• Cost optimization and innovative, segmented service offerings are driving margin improvement, improved customer retention, and diversified, stable revenue streams.
  
• Declining wireless growth, rising competition, heavy debt, and high investment costs threaten Verizon's margins and long-term earnings amid limited future market opportunities.

Catalysts

Through its subsidiaries, engages in the provision of communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide.

• The rapid expansion of fixed wireless access (FWA) and fiber broadband, as evidenced by accelerating subscriber growth (5M+ FWA subscribers, robust broadband net adds, and the pending Frontier acquisition), positions Verizon to capitalize on surging demand for high-quality home and business connectivity as more devices, smart homes, and bandwidth-intensive applications proliferate, supporting future service revenue and ARPU growth.
  
• Digital transformation among enterprises and increased remote work are sustaining strong demand for Verizon's private network and AI-enabled connectivity solutions, with an expanding $2B+ sales funnel and landmark deals indicating growing adoption of advanced use cases like edge computing-creating new high-margin enterprise revenue streams and enhancing overall net margins.
  
• Ongoing cost optimization-driven by successful voluntary separation programs, copper network decommissioning, AI-powered process efficiencies, and operational streamlining-continues to improve operating leverage and expand EBITDA and free cash flow, underpinning sustainable future earnings growth.
  
• The scalable C-band 5G rollout (tracking ahead of schedule and targeting 80–90% coverage) strengthens Verizon's competitive advantage in network quality and capacity, enabling premium offerings to meet increasing video, data, and streaming usage and supporting pricing power that could drive higher ARPU and improved margins.
  
• Strategic focus on segmented, customer-centric plans (e.g., myPlan, myHome, My Biz Plan), incentives like perks and guarantees, and product innovation is already yielding improved net additions, better retention, and increasing prepaid/adjacent service contributions, which bodes well for diversified revenue growth and margin stability as the consumer market matures.

Verizon Communications Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Verizon Communications's revenue will grow by 1.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.3% today to 15.3% in 3 years time.
• Analysts expect earnings to reach $22.1 billion (and earnings per share of $5.24) by about September 2028, up from $18.2 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.3x on those 2028 earnings, up from 10.1x today. This future PE is lower than the current PE for the GB Telecom industry at 15.2x.
• Analysts expect the number of shares outstanding to grow by 0.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Verizon Communications Future Earnings Per Share Growth

Risks

• Persistent elevated postpaid phone churn and ongoing intense promotional activity among competitors could undermine longer-term subscriber retention and revenue growth, especially as the US wireless market matures and organic subscriber growth slows, negatively impacting long-term earnings and margins.
  
• Elevated capital expenditure requirements for the buildout of 5G, C-band, and fiber networks-alongside the pending integration of Frontier-lock in high ongoing costs; if new technology is not adequately monetized or if execution struggles, operating margins and return on investment may be compressed for multiple years.
  
• Stagnation in wireless growth and still-uncertain contributions from new ventures (e.g., private networks, AI-powered enterprise offerings, perks, and adjacent services) leave Verizon highly exposed to the core wireless market and vulnerable to price commoditization, putting future revenue growth at risk.
  
• High debt burden ($116 billion in net unsecured debt) limits financial flexibility, particularly as further interest rate rises or unforeseen macroeconomic shifts could increase debt servicing costs and erode net margins, impacting free cash flow and future capital allocation options.
  
• Declining population growth in the US and a saturated wireless market cap the company's addressable market, making it increasingly difficult to deliver organic revenue growth and leaving Verizon reliant on cost-cutting rather than top-line expansion to bolster earnings over the long term.

Valuation

• The analysts have a consensus price target of $48.61 for Verizon Communications based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $58.0, and the most bearish reporting a price target of just $42.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $144.5 billion, earnings will come to $22.1 billion, and it would be trading on a PE ratio of 11.3x, assuming you use a discount rate of 6.8%.
• Given the current share price of $43.57, the analyst price target of $48.61 is 10.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.