VERIZON COMMUNICATIONS INC (VZ): what the price requires

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/VZ

Headline

Field	Value
Ticker	VZ
Company	VERIZON COMMUNICATIONS INC
Current price	$42.75/sh
Composition	Service 59% / Wireless equipment 16% / Other 3% / Enterprise and Public Sector 10% / Business Markets and Other 10% / Wholesale 1% / Intersegment revenues 0%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin needed	11.4%
Operating margin today	23.9%
Margin compression implied	-12.5pp
Multiple paid	9x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6.3% sits below it).

How unusual the bet is: within-range

Reference	Value
vs own history	-0.40σ
cohort percentile (of 32 peers)	16
implied end-window share	0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	0.90x	5	justifies
Earnings	0.87x	4	justifies
Relative	0.86x	5	justifies
Growth	0.81x	4	justifies

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.8%); the inversion above states its own rate.

Per-Model Detail (n=18)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$146.84	0.29x	yes	FCF base $37.3B, growth 3% (input: historical growth), terminal g 2.9%, WACC 7.8%, 5yr projection
DCF Exit Multiple	Growth	$59.53	0.72x	yes	Exit EV/EBITDA: 4.0x / 4.6x / 6.6x (bear / base = today's held flat / bull), 5yr
Relative Valuation	Relative	$60.36	0.71x	yes	P/E 12x (static sector reference · 2026-04), scenarios: 10.1x / 12.0x / 13.9x (bear / base = reference held flat / bull), EV/EBITDA 7x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	$47.67	0.90x	yes	Stage 1: 3% for 5yr, Stage 2: 3.5% perpetual
Simple Excess Return	Asset	$44.53	0.96x	yes	BV/sh $24.54, ROE (TTM) 16.8%, ke 9.3%
Two-Stage Excess Return	Asset	$59.20	0.72x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$26.61	1.61x	yes	Rev $139.1B, growth 3% (input: historical growth; tapered), Terminal P/S: 1.1x / 1.3x / 1.5x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$49.32	0.87x	yes	EPS $4.11, growth 3% (input: historical EPS growth), PEG=4.13 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$51.45	0.83x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $30.01B × (1−24%) / WACC 7.8% → EPV (no growth)
Residual Income	Asset	$59.69	0.72x	yes	BV $24.54 + 5yr PV of (ROE (TTM) 16.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham Number	Asset	$47.64	0.90x	yes	√(22.5 × EPS $4.11 × BVPS $24.54) — Graham's conservative floor
EV/EBITDA Relative	Relative	$69.84	0.61x	yes	EBITDA $48.19B × sector EV/EBITDA 7.0x
FCF Yield	Earnings	$85.60	0.50x	yes	FCF $37339.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$46.61	0.92x	yes	EPS $4.11 × (8.5 + 2×2.5%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$13.38	3.20x	yes	BV $24.54 × (ROIC 4.3% / WACC 7.8%)
P/Sales Sector	Relative	$49.58	0.86x	yes	Revenue $139.15B × sector P/S 1.5x
PEG Fair Value	Relative	$20.55	2.08x	yes	EPS $4.11 × (PEG 1.5 × growth 2.5% (input: historical EPS growth)) → PE 3.8x
Earnings Yield	Earnings	$44.43	0.96x	yes	EPS $4.11 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$41.0b
Net debt / NOPAT (after-tax)	1.66x
Net debt / operating income (pre-tax)	1.26x
Interest coverage	4.7x
Share count CAGR (dilution)	0.0%
Burning cash	no

Bullet Takeaways

• Verizon is a cash machine priced like a melting one: it earns about 21% operating margins on roughly $139 billion of revenue and generates around $37 billion of operating free cash flow, yet trades at about nine times operating income.
• The defining risk is competition, which the 10-K expects "to remain intense as traditional and non-traditional participants" chase the same wireless and broadband customers, pressuring pricing and net additions.
• What to watch is subscriber momentum: Verizon posted positive postpaid phone net additions in the first quarter of 2026 for the first time in 13 years, alongside its 20th consecutive annual dividend increase.

Bull Case

What traditional valuation models miss about Verizon is hidden in plain sight: the gap between how the market prices the stock and how much cash the business actually produces. At about nine times operating income, the price treats Verizon as a business in slow, permanent decline. But the cash flow tells a different story. The company generates roughly $37 billion in operating free cash flow a year, funds a dividend that yields well above the broad market, and just raised that dividend for the twentieth consecutive year. A business that can raise its payout for two decades while pricing in decline is one the market may be mismeasuring.

The underlying franchise is a genuine infrastructure utility. Verizon owns a nationwide wireless network and the spectrum behind it, an asset that took decades and tens of billions to build and that any competitor must match to compete. The 10-K describes a service-revenue base anchored in postpaid wireless, with growth coming from "increasing the number of wireless customers, expanding the penetration of FWA and connected devices including wearables, tablets and IoT devices." Wireless service revenue has been rising on pricing actions and subscription growth, the kind of steady, recurring revenue that supports the dividend through any economic weather. Fixed wireless access is a real second growth leg, letting Verizon sell home broadband over the same network without trenching fiber.

The operational inflection is what the bull case has been waiting for. In the first quarter of 2026 Verizon delivered positive postpaid phone net additions for the first time in 13 years, with churn falling meaningfully. That matters because the bear case on Verizon was always that it was losing subscribers to T-Mobile and the cable carriers; positive net adds undercut that thesis directly. Layer on the Frontier acquisition, which adds fiber and is expected to drive over $1 billion of run-rate cost synergies by 2028, and you have a business that is growing subscribers, cutting costs, and deleveraging, all while paying you a large, growing dividend to wait. Every valuation family supports the price, which for a name this size means the downside is unusually well-covered.

Bear Case

The methods do not actually disagree much on Verizon, and that consensus is itself the bear's most honest framing: this is a cheap stock for structural reasons, not a mispriced one. The bear case is therefore not that the stock is wildly overvalued; it is that the low multiple is the market's correct read on a business whose growth is structurally capped and whose balance sheet is heavy. The few methods that reach well above the price, like the unconstrained cash-flow capitalization, assume the cash flow holds forever, which is exactly the assumption the bear questions.

Competition is the structural pressure. The 10-K is direct that the company faces "significant competition" and that the "rapid development of new technologies, services and products has eliminated many of the traditional distinctions among wireless, cable, internet and other communication services and brought new" competitors into its markets. Verizon competes against a resurgent T-Mobile and cable operators reselling wireless at aggressive prices, and the one quarter of positive net adds came after years of losses and required heavy promotional and pricing effort. In a market where everyone sells essentially the same connectivity, pricing power is limited and the cost of holding subscribers keeps rising. The wireless business is mature, and maturity in a competitive commodity is a recipe for low-single-digit growth at best.

The balance sheet is the constraint the dividend has to clear. Verizon carries net debt around $41 billion, and while that is a manageable 1.4 times operating income, the absolute load is large and the Frontier acquisition adds more debt to integrate and pay down. The capital intensity is relentless: maintaining and upgrading a national network consumes billions in capex every year, and spectrum is a recurring cost, not a one-time purchase. That leaves the free cash flow stretched across a large dividend, heavy capex, and debt reduction simultaneously. If competition forces deeper price cuts, or if rates rise and the dividend yield has to compete with safer income, the same low multiple that looks like value can simply persist, and a stock that pays you to wait can keep you waiting for years. The bear case is the value trap: cheap, yielding, and going nowhere.

Valuation

The price is barely asking for anything, and the inversion says so as a bound rather than a forecast. At about $45 (as of June 27, 2026) the market pays roughly nine times company-wide operating income, a multiple so low that the price sits below what even a 5%-a-year decline in operating profit would warrant. In plain terms, the market is pricing Verizon as if its profits will shrink, not grow. For a business currently growing service revenue and adding subscribers, that is a conservative starting point, and it sits in the lower half of the telecom peer multiple range.

The methods we use to triangulate cluster tightly around the price, which is the defining feature here. The asset-value methods, anchored on book value per share near $24.50 plus excess returns, the earnings-power method capitalizing normalized operating profit, the peer-multiple lens at a market-typical telecom multiple, and the dividend-discount model all land within a narrow band around the current price. A handful reach well above it, notably the unconstrained free-cash-flow capitalization near $86, because Verizon's cash generation is enormous relative to its market value, but that frame credits the cash flow continuing in perpetuity. The pattern is a value-and-income name where the price is defended from every angle, with the upside case resting on whether the cash flow durability the market doubts actually holds. The peer cohort here, the wireless and telecom carriers including T-Mobile and AT&T, carries the same capital-intensive, mature-market economics.

Solvency is comfortable enough to protect the dividend. Net debt around $41 billion at 1.4 times operating income, with interest coverage above four times, is a heavy but serviceable load, and the share count is roughly flat rather than diluting. The company is not burning cash; it is allocating a large, steady cash flow across the dividend, network capex, and debt reduction. The downside is bounded by the recurring service revenue and the dividend that the cash flow comfortably covers; the risk is not insolvency but stagnation, a price that stays cheap because the growth never materializes.

Catalysts

Verizon's first quarter of 2026 delivered the operational turn the stock needed. Total revenue rose about 2.9% year over year to roughly $34.4 billion, with GAAP net income up about 3.3% to roughly $5.15 billion and free cash flow of about $3.8 billion, up 4%. The headline was subscribers: Verizon posted positive postpaid phone net additions for the first time in 13 years, with consumer postpaid phone churn falling below 0.85%.

Guidance and capital returns moved in the right direction. Management raised full-year 2026 adjusted EPS growth guidance to a range of 5% to 6% from 4% to 5%, reaffirmed mobility and broadband service revenue growth of 2% to 3%, and guided free cash flow growth of about 7% or more. The board raised the annual dividend by about 2.5%, the 20th consecutive annual increase, the core of the income thesis. The Frontier acquisition closed on January 20, 2026, and management targets more than $1 billion of run-rate cost synergies by 2028 along with substantial Frontier debt paydown during the year, plus AI-first network initiatives with partners. The watch items are whether postpaid net adds stay positive, how the Frontier integration and deleveraging progress, and whether service-revenue growth holds against competitive pricing.

Peer Cohorts (Per Segment, With Filing Citations)

Consumer / Business (reported)

• T (AT&T INC.)
• (no filing in the citation store)
• TMUS (T-Mobile US, Inc.)
• (no filing in the citation store)
• KT (KT Corporation)
• (no filing in the citation store)
• TIGO (MILLICOM INTERNATIONAL CELLULAR SA)
• (no filing in the citation store)
• TLK (PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA TBK)
• (no filing in the citation store)

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 earnings release, April 2026 · Q1 2026 guidance, April 2026 · company announcements, 2026