When looking at Verizon (VZ -0.10%), it's just a very steady business with remarkable revenue, but is there more to it than meets the eye? In this video clip from "The Virtual Opportunities Show" on Motley Fool Live, recorded on April 12, Fool.com contributors Travis Hoium, Demitri Kalogeropoulos, and Jose Najarro discuss how the big telecom company may be underappreciated by investors and is well-positioned long term.
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Travis Hoium: Here's just a five-year chart of Verizon's revenue and net income. You can see that revenue is about as stable as it gets for a big company. Dividend is steadily growing, yielding 4.8% right now. That net income number is just tremendous. One thing I think it's worth noting here is free cash flow has dipped a little bit in the last year and that's because they bought a whole bunch of spectrum to advance their 5G network.
But, this is really what excites me about Verizon. This is partially because I am an early user of the Verizon Home product, just came out earlier this year. You can now have 5G internet instead of getting it from, for me, it would be Comcast (CMCSA 0.86%) and have that wire coming into your house. Just literally set a box on my desk and turn it on and now I have Wi-Fi in the house. It's crazy and it's actually faster than my Comcast internet and more reliable. Reliability, maybe not Comcast's strength.
I think this is really something that is underappreciated by investors because a lot of times when we think about a company like Verizon and you go like most people who have cellphones or smartphones already have it. There's not a lot of growth there. Maybe you're going to be able to ratchet up prices a little bit, maybe expand margins a little bit but there's not a lot going on with the business.
I think when we talked about all these products in the metaverse, in VR and AR, what's going to be more and more important is the connection to the edge of computing. Think about 10 years ago, 20 years ago you would do all your computing on your device or most of your computing on your device. Now we're moving to the point where I think not too long you're going to be able to have a VR headset on.
Instead of having that computing power in your headset itself, you're actually just going to connect to a 5G network. Some of that computing power is going to be on the edge of the cloud. What you're going to need to make that happen is a fast internet connection, a 5G internet connection. That's where Verizon comes in. It's not only smartphones. Now add in the home where they're able to reach into that, create more of a bundled product and all these devices that I think are coming down the pipeline, whether that's glasses or smart cars, there's all kinds of optionality.
I think this is going to be the infrastructure company that's going to be really well-positioned long term, not priced as a growth stock. It's priced more like a value stock or dividend stock. But I think there's a lot more growth than investors are anticipating right now. That's why I wanted to bring this to the forefront. Maybe not the most exciting company to follow, but it's an infrastructure play as we use more and more data and that's why I like it right now.
Demitri Kalogeropoulos: Really cool. Another use case there I would mention is like Jose and I was talking about it this morning at the break of dawn at 8:00 a.m. show, cloud gaming I've been doing personally.
Hoium: Absolutely.
Kalogeropoulos: I've been so impressed with that and just it's so easy to see how that would move all that. I don't need a super-cooled massive gaming computer here in my house. If I could just stream to one somewhere else fast enough that I could still benefit from all that tech.
Hoium: Absolutely. Think of all of these technologies that we're talking about right? What's gonna connect it all? Our internet connection.
Jose Najarro: This is exactly, I was going to say that Travis, EV maybe right now they don't need too much kind of 5G information but eventually once we kinda go into autonomous vehicles and stuff like that you're gonna need that kind of infrastructure there to be able to transfer all that data points and whatever else the other cars are talking about so I think that's a pretty interesting play for sure.
