Verizon Communications Inc. (NYSE: VZ) shares have weakened more than 25% since the beginning of January 2022, and the current price stands at $38.41.
Last week, Morgan Stanley upgraded its rating on Verizon to overweight from equal-weight and raised the price target to $44.
Morgan Stanley upgraded its rating on Verizon
Verizon is a major American telecommunications company, currently the second largest in the country, just behind AT&T Inc. (NYSE: T).
The company’s share price came under further selling pressure after Verizon reported mixed third-quarter results in October and announced it would start a cost-savings plan to take out between $2 billion and $3 billion in annual expenses by 2025.
Verizon added 8,000 postpaid phone subscribers during the third quarter, which was below estimates, and reported that it continues to expect wireless service revenue growth between 8.5% and 9.5% for 2022. This is certainly not bad, and it is important to note that Verizon’s business model is relatively resilient versus recessions, as demand for phone services isn’t overly cyclical.
Morgan Stanley recently upgraded its rating on Verizon to overweight from equal-weight and raised the price target to $44.
This implies a nearly 15% upside from the current price levels, and according to Morgan Stanley, there is a big chance for better operational performance in the 2023 year. Simon Flannery, an analyst from Morgan Stanley, said:
We think the underperformance this year has been driven in part by negative earnings revisions and concerns around intensifying wireless competition. However, we believe that at current levels, the stock is now discounting an overly negative relative outlook and see signs that trends are gradually improving.
Verizon has a good position in the market, and the current share price is attractively valued based on its earnings, future prospects, and dividend.
The dividend yield is above 6% at the current share price, and the company continues to have strong cash flow, which remains an important figure supportive of its current dividend payout.
Verizon shares are currently trading at a “multi-year low,” under eight times forward P/E, at less than four times TTM EBITDA, which also proves that Verizon is currently quite undervalued.
$35 represents the current support level
Verizon shares have weakened from $50.55 to $34.55 since July 20, 2022, and the current price stands at $38.41.
Data source: tradingview.com
The current support level stands at $35, while $40 represents the first resistance level. If the price falls again below $35, it would be a “sell” signal, and we have the open way to $33 or even below. Conversely, if the price jumps above $40, the next target could be resistance at $45.
Summary
Verizon has a good position in the market, and the current share price is attractively valued based on its earnings, future prospects, and dividend. Morgan Stanley recently upgraded its rating on Verizon to overweight from equal-weight and raised the price target to $44.
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