Verizon's Stock Finally Ended the Year on a Positive Note. The Bull Sees a Bigger Gain in 2024.

Verizon Communications Inc. experienced a modest 3% increase in its shares in 2023, marking its first positive annual performance in five years. As investors contemplate the outlook for 2024, Brandon Nispel, an analyst at KeyBanc Capital Markets, appears optimistic, upgrading the telecommunications stock from sector weight to overweight in a note to clients late Tuesday. Nispel's bullish stance is reflected in his price target of $45, indicating a potential upside of more than 15% from Tuesday's closing price of $38.88.

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In his analysis, Nispel anticipates a "deleveraging story with the potential for share repurchases" extending into 2025, providing a positive narrative for investors. Despite acknowledging the likelihood of continued declines in Verizon's postpaid phone market share, he foresees improvement in its share of net additions and gross additions. Additionally, Nispel expects Verizon to exhibit progress in its postpaid phone net additions throughout each quarter of 2024, distinguishing it from competitors such as AT&T Inc. and T-Mobile Inc., which he predicts will experience a slowdown in this metric on a year-over-year basis.

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One key factor contributing to Nispel's optimism is the perceived low competitive intensity within the wireless industry. He notes that wireless carriers, including Verizon, seem content with their current performance, demonstrating a reluctance to engage in aggressive promotions that could compromise corporate margins. This complacency, according to Nispel, makes wireless exposure more appealing for investors. Furthermore, the analyst sees the potential for above-average growth rates in postpaid phone subscribers, highlighting another positive development for the industry.

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Nispel also emphasizes the attractive valuation of Verizon's shares, noting that they are currently trading at 6.2 times the enterprise value to estimated 2025 earnings before interest, taxes, depreciation, and amortization (Ebitda). This valuation appears favorable when compared to the 10-year average of 6.8 times, indicating potential undervaluation in the market.

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Verizon's stock responded positively to Nispel's analysis, showing a 1% increase in premarket trading on Wednesday. As investors weigh the potential for improved performance in 2024, Nispel's upgraded rating and positive outlook contribute to the positive sentiment surrounding Verizon Communications Inc.