Why Has Verizon's Stock Price Been Dropping?
At the beginning of this article, I highlighted that VZ's stock price fell by -18.1% since I wrote my previous article for the company. In fact, Verizon's shares are down by an even more substantial -29.1% in the past one year. In the same time frame, the broader market as represented by the S&P 500 corrected by a milder -15.9%.
There are a few reasons for the drop in Verizon's stock price.
The first reason is that investors have lost confidence in VZ, as a result of the company's disappointing management guidance updates provided when it released its financial results for Q1 2022 and Q2 2022.
In late-April when Verizon reported its first-quarter earnings, the company highlighted that its full-year fiscal 2022 "wireless service revenue growth", "adjusted EBITDA growth", and "adjusted EPS" are expected to be "at the lower end of" its earlier guidance. When VZ announced its Q2 2022 results on July 22, 2022, it lowered its guidance for all the key metrics like top line, operating profit, and bottom line.
The second reason is that the market is concerned about the resilience of Verizon's revenue and earnings in an environment of weak economic growth and low consumer confidence.
Notably, VZ did mention at BofA (BAC) 2022 Media Communications & Entertainment Conference on September 8, 2022 that "we have to be mindful of our customers" with "the economic backdrop", as "they're feeling the pain in their monthly bill." Also, Verizon's peer, AT&T (T) also highlighted at the Goldman Sachs (GS) Communacopia + Technology Conference on September 12, 2022 that there was "some extension on payment cycles" for its subscribers, even though there is no "further deterioration of what we saw earlier in the year."
The third reason is that Verizon has been ceding ground to the company's rivals.
According to a MoffettNathanson sell-side research report cited in an August 12, 2022 Fierce Wireless article, VZ "has lost market share in every quarter since the second quarter of 2020." This is a view validated by the operating metrics for Verizon. In the second quarter of 2022, Verizon achieved postpaid phone net additions of around +12,000. In contrast, AT&T delivered a much postpaid phone net additions figure of in excess of +800,000 in the most recent quarter.
In the subsequent section, I touch on Verizon's valuations in light of the company's share price drop for the last one year.