Verizon shares (NYSE:VZ) plunged over 7% to their lowest level since 2017 as a result of a bad reaction to a quarterly report in which the firm marginally missed profit estimates but reduced its guidance due to a large failure in wireless subscription growth. Overall revenue was steady at $33.8 billion, in line with estimates. In addition, wireless service revenue increased 9.1% to $18.4 billion. However, the company attracted only 12,000 new postpaid phone users, compared to analysts’ expectations of more than 167,000.
The slowdown resulted in some significant guidance cutbacks, which prompted investors to sell. Verizon (NYSE:VZ) has revised its earnings prediction to between $5.10 and $5.25 per share, down from $5.40 to $5.55. Verizon (NYSE:VZ) executives also trimmed the company’s 2022 wireless service revenue growth prediction to 8.5% to 9.5%, down from a previous forecast of 9% to 10%. Verizon (NYSE:VZ) also stated that it expects service and other revenue for 2022 to be flat or drop by up to 1% from the previous year, implying that growth this year is unlikely. The company previously projected EBITDA growth of 2% to 3% but now anticipates it to be flat, at best, or down as much as 1.5% from a year ago.
The Chief Financial Officer, Matt Ellis, stated, “Although recent performance did not meet our expectations, we remain confident in our long-term strategy. We believe that our assets position us well to generate long-term shareholder value.”
On Verizon’s Competitors
Two bad telecom reports in two days impacted the sector, which is normally defensive. Rival AT&T (NYSE:T) was chastised for its Thursday earnings announcement, which reduced free cash flow guidance, citing the risk of consumers postponing bill payments. On Verizon’s (NYSE:VZ) Friday conference call, Ellis stated that he had not seen any delays from Verizon (NYSE:VZ) customers and that the 2022 difficulties are only a temporary impediment. AT&T (NYSE:T) slumped 3% Friday as, in addition to the ongoing reaction to its report, Barclays downgraded AT&T’s (NYSE:T) stock to equal weight and raised the problem of management credibility.
T-Mobile (NASDAQ:TMUS), a “Big Three” U.S. rival, appeared positive in comparison to AT&T (NYSE:T) and Verizon (NYSE:VZ), as its shares fell by 1.3%. T-Mobile parent Deutsche Telekom (OTCQX:DTEGY) lost 3% in US trading. Foreign telecommunications companies Telefónica (BME:TEF), Orange (NYSE:ORAN), and Telia (OTCPK:TLSNY) all fell into the red.
Citi was more optimistic about cellular and internet stocks on Wednesday, reducing its predictions somewhat but still predicting “strong” growth from the sector. Citi has updated its models for cellular and broadband stocks ahead of earnings season, and while it has reduced its revenue growth forecast slightly, it still expects “strong” revenue growth. Revenues in the Communication Services business are expected to rise 2.3% to $546 billion this year, a little decrease from Citi’s previous forecast.
The team of Michael Rollins, Jason Bazinet, and Anthony Nemoto said, “Demand for mobile and fixed broadband solutions are likely to stay steady during a recession, although customers may choose to optimize spend through value-shopping, migrate to lower-spending broadband and mobile tiers, and consider cheaper solutions, such as wireless home broadband, prepaid mobile, & mobile substitution of broadband.
Recent remarks from industry participants have indicated several dangers to broadband revenue and volume performance to be aware of. They expect telecom and cable providers to find ways to extract pricing that does not disrupt marketing tactics to offset inflationary pressures. They argue that broadband volume estimates are challenged by slower growth and rising fixed wireless broadband user numbers. They anticipate 3.3 million total broadband net additions for the year, with wireless accounting for a larger percentage, putting cable net additions for the quarter and year at risk.
Featured Image: Megapixl © Imdan
