While Verizon Communications Inc. (NYSE:VZ) actively defends its leading wireless position and invests in long-term growth, Nomura does not expect the visibility of success from this capital spending to improve until well into calendar year 2017 (CY17). Analyst Jeffrey Kvaal talked about these issues in his research note today, after a meeting with CFO Fran Shammo this week.
Mr. Kvaal reiterated a Neutral rating on VZ stock—which is down 1.5% during the late trading hours today—and set a $47 price objective. He shed light on the new unlimited data offers by the company’s peers. All wireless operators, except Verizon, have launched unlimited data plans this year. The analyst noted that the carrier’s market share has not been impacted so far, as its churn rate is at record lows.
The communications services provider believes that the unlimited plans erode the return on investment (ROI), as the return on marginal data traffic is zero. The analyst does not expect Verizon to follow its rivals in the unlimited data package race.
The analyst estimated fiscal year 2016 (FY16) and FY17 earnings per share (EPS) to clock in at $3.91 and $4.06, respectively, as opposed to the Street’s expectations of $3.90 and $4.04. of the 33 analysts who provide coverage on VZ shares, nine recommended buying it, while 24 tagged it as Hold. The 12-month average target price currently stands at $54.50, which reflects a 4.5% upside over the current price.
VZ stock has outperformed both the telecommunication services sector and S&P 500 Index year-to-date (YTD). It has gained 11.37% so far this year, compared to the telecom industry’s and broader market’s gains of 8.88% and 8.83%, respectively. At present, the shares are trading down 1.44% at $51.99, as of 2:30 PM EDT.