Verizon (VZ) Bull Bear Case

Bull Bear Case Bull Bear EPS $3.74 $3.04 P/E 15.76x 15.76x Target Price $58.9 $47.9 Verizon is currently trading at a 17.4% premium to S&P 500; similarly, its five-year historic price to earnings (P/E) multiple has averaged 16.2x, compared to 15.1x for the S&P 500. On the other hand, its current stock price ($50.31) is a multiple of 14.4 times its expected earnings for 2014, which is a 2% discount to the market. In 2011, Verizon traded at its highest premium to the market (46%), following the introduction of Apple Inc.'s iPhone on its network. In 2009, it traded at the largest discount to the market (39%), when the global economy was in a rut and the company's earnings had fallen 5% from 2008. Bull Case Bear Case Our bull case for an investment in Verizon stock assumes an earnings multiple of 15.76x, which is a 7.6% premium to the S&P 500's 2014 forward P/E and Our bear case uses the same earnings multiple (15.76x) as the bull case, but we assume that the company's earnings will be near the low end of consensus estimates at $3.04, based on saturation in the US wireless market and increasing competition from other telecom carriers. is based on the five-year historic average P/E of the company and the index. Our earnings estimate of $3.74 is based on the best-case market estimates for 2014 for the company. Our bull case focuses on Verizon's acquisition of the remaining share of Vodafone's stake in its wireless business, which will result in an increase in cash flows from operations for the company, since it will no longer have to pay dividends to Vodafone We have also factored in the expected growth in revenues from data services and the addition of subscribers following the increased adoption of smart devices. Growth in Verizon's FIOS service should also lead to additional revenues from the company's Wireline business. Lastly, if Verizon successfully acquires the 700 MHz spectrum that is to be auctioned in January, it can expand its network offerings and consider a possible acquisition in the Canadian market. BIDNESS SOURCES: Company Data, SEC filings, Bloomberg Professional Services Etc. DISCLAIMER: Bidness Etc(TM) and related marks are owned by Bidness Etc. Any other trademarks appearing on this website are the property of their respective owners, and are not used to indicate the origin of goods or services offered or provided by Bidness Etc herein or to suggest approval for or affiliation with Bidness Etc.