1 Underrated Reason Why Verizon Stock Looks Great Now

Mobile data use is on the rise, and that's good news for Verizon (NYSE: VZ  ) stock. The carrier's shares are slightly ahead of the S&P 500 so far this year.

There's good reason to be believe we'll see further gains in the months and years ahead. Verizon activated 25% more iPhones in the first quarter and 7.2 million smart handsets overall thanks, in part, to surprisingly strong Windows Phone sales. Meanwhile, wireless industry analyst Chetan Sharma says U.S. revenue from mobile data grew 14% to $21 billion in the first quarter. All signs point to greater demand for Verizon's gear and services.

But investing is also a game best played in context. How does Verizon stock compare to peers AT&T (NYSE: T  )  and Sprint Nextel (NYSE: S  ) ? Here's what the numbers say:

Key Statistics
Verizon
AT&T
Sprint Nextel

Current share price

$48.89

$34.71

$7.01

Shares outstanding

2.86 billion

5.38 billion

3.02 billion

Market cap

$143.2 billion

$189.6 billion

$21.1 billion

Trailing P/E ratio

123.2

26.88

Not available

PEG ratio

1.71

2.25

(1.61)

Gross margin

60.8%

56.7%

41.6%

Cash from operations

$33.06 billion

$39.53 billion

$2.96 billion

Sources: S&P Capital IQ and Yahoo! Finance.

And here's what Fools say, going by the data available in our CAPS investor intelligence database:

CAPS Category
Verizon
AT&T
Sprint Nextel

CAPS stars (out of 5)

****

***

**

No. of CAPS ratings

4,926

5,878

2,496

Bullish CAPS ratings

4,627

5,421

2,023

Bearish CAPS ratings

299

457

473

Bull ratio

93.9%

92.2%

81%

Source: Motley Fool CAPS.

Fools rate Verizon tops among carriers for a variety of reasons, including optionality in the business. "The top cell phone network provider and their purchase of Hughes Telematics was a wise move given the personal auto insurance potential use of telematics universally," writes CAPS investor bccleveland.

Verdict: Verizon stock is a buy
Skeptics will note that telecom hasn't exactly been a great business of late. T-Mobile has all but eliminated long-term contracts, which also threatens subsidies. Consumers who want the latest gear may soon have to pay up for it in ways they haven't previously. Handset sales could dip as a result.

Or not. Telecom is a tough business with a tumultuous history. I'd rather bet on Verizon's ability to navigate treacherous waters while collecting (and reinvesting) a quarterly dividend that yields 4% as of this writing. As such, I've taken a long position in my CAPS portfolio.

Now it's your turn to weigh in. What you do with Verizon stock right now? Let us know what you think of Big Red's business, and whether you'd buy, sell, or short at current prices, using the comments box below.

Don't wait -- get paid
If you're an investor who prefers returns to rhetoric, you'll want to read The Motley Fool's new free report: "5 Dividend Myths... Busted!" In it, you'll learn which stocks provide premium growth and whether bigger dividends are better. Click here to keep reading.


Read/Post Comments (3) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 21, 2013, at 10:39 PM, plange01 wrote:

    vz will be a buy when it drops under $40

  • Report this Comment On June 22, 2013, at 6:17 AM, Boomer757 wrote:

    VZ is a $42 stock that's grossly overpriced right now. It's a buy/hold for the long term but for day traders like me it's poison.

  • Report this Comment On June 22, 2013, at 6:23 PM, neamakri wrote:

    sorry to be so ignorant. I looked up "telematics" in Wikipedia. They defined it using "informatics". Wikipedia does not have a definition for "informatics".

    WTF?

    anyway, I own some (T) and am very satisfied.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2503225, ~/Articles/ArticleHandler.aspx, 9/21/2014 12:33:19 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement