Verizon Eyed for Potential Re-Rating by Analysts
An analyst's deep dive on Verizon ($VZ) suggests the company trades at a significant discount to its peers, at approximately 10x its estimated FY2026 earnings per share. A potential re-rating to an 11-13x multiple is seen as possible, driven by EPS growth, its partnership with AST SpaceMobile, and the impact of interest rate cuts. Rate cuts are projected to boost valuation through WACC compression and multiple expansion.
- Verizon's forward price-to-earnings ratio of approximately 9x is lower than competitor T-Mobile's, which trades at a premium of over 20x forward earnings. AT&T trades at a similar valuation to Verizon, around 8 to 8.5 times forward earnings. - The company has a history of consistent dividend payments, having increased its dividend for 22 consecutive years. The current annual dividend is $2.76 per share, representing a yield of approximately 5.6-6.9%, with a payout ratio of 57.56%. - For full-year 2025, Verizon raised its guidance for free cash flow to between $19.5 billion and $20.5 billion. The company anticipates 2026 free cash flow to be $21.5 billion or more. - The partnership with AST SpaceMobile, which also has partnerships with AT&T, Google, and Vodafone, aims to provide satellite-based cellular broadband to expand coverage in remote areas. In May 2024, Verizon announced a $100 million deal with AST SpaceMobile to enhance its coverage in remote parts of the United States. - Verizon has been actively managing its debt, announcing on November 3, 2025, the redemption of all its outstanding 1.450% notes due in 2026 and all 3.000% notes due in 2027. As of the end of the first half of 2025, the company's net unsecured debt to adjusted EBITDA ratio was 2.3x. - Interest rate cuts can positively impact telecom valuations by lowering the discount rate used in discounted cash flow (DCF) models, which increases the present value of future earnings. For capital-intensive companies like Verizon, lower rates also reduce the cost of borrowing for infrastructure investments, such as the ongoing 5G and fiber rollouts.
