JPMorgan Says Verizon's Growth Will 'Pick Up' Next Year

JPMorgan Says Verizon's Growth Will 'Pick Up' Next Year

The bullish case for Verizon Communications Inc. VZ is based on six catalysts that will help growth "pick up" in 2021, according to JPMorgan.

The Analyst: Philip Cusick upgraded Verizon's stock from Neutral to Overweight with a price target lifted from $61 to $65.

The Thesis: The six catalysts include:

  1. Verizon "surprised" investors two weeks ago when it revised fourth-quarter service revenue growth from 0.7% to more than 2%. The expiration of the Disney+ free promotion implies Verizon can start contacting customers to move them up to higher-end unlimited plans to extend the Disney+ promotion.
  2. Verizon was at a spectrum disadvantage but its purchase of 34 MHz of CBRS spectrum in 2019 while another 100 MHz to 200 MHz auction next month will address the shortages.
  3. Verizon's $7.15 billion acquisition of Tracfone could prove to be 5 cents per share accretive to Verizon's EPS in the first full year with the potential of expanding as much as six-fold.
  4. The likelihood of a large corporate tax increase from 21% today to 28% under a potential Joe Biden administration is "lower."
  5. Verizon has new revenue streams from a fiber network that could show "hints of life" in 2021 and become "more impactful" in 2022 and beyond.
  6. Verizon has made it clear to investors it's holding on to cash to spectrum auctions and this is the "highest priority." If the company spends $20 billion at the upcoming auction it can start exploring share buybacks in 2023, but it can "bring that discussion forward" in 2021 or 2022 and this option isn't priced into the stock today.

Verizon's stock traded up 2.7% to $58.79 at publication time,

Image credit: Anthony92931, via Wikimedia Commons

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