UPDATE: Credit Suisse Assumes Coverage on Verizon Communications with Neutral Rating, $45 PT
In a report published Monday, Credit Suisse assumed coverage on Verizon Communications (NYSE: VZ) with a Neutral rating and $45.00 price target.
Credit Suisse noted, “Verizon shares present a tantalizing opportunity, as the company continues to take share in an industry with increasingly rational competitive behavior and improving economics; we remain on the sidelines, however, given full valuation. 1) Wireless Subscriber Trends Strong.: Verizon continues to gain wireless sub share on the back of (a) its first mover LTE advantage, and (b) new shared data plans. 2).And Wireless Margins Robust.: Moreover, wireless margins remain robust (~45%+ & the highest in the industry), given its scale, disciplined upgrade policies, and overall declining handset volumes, 3).But Wireline Under Pressure: Management had hoped that a union contract re-negotiation and a rebound in the economy would drive growth in wireline margins in 2H12. However, because of the longer than expected negotiations and macro uncertainty, we expect continued revenue and margin pressure through 2H12, 4). And Valuation Remains Full: Verizon trades at a P/E multiple of ~14.4x our 2013E EPS, ~16% higher than the 2013E S&P P/E multiple of ~12.4x. While we believe the premium is justified, we view upside from current levels as somewhat limited.”
Verizon Communications closed on Friday at $45.16.
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