"Verizon's Stable Wireless Business Despite COVID-19... Investment Appeal Rises Considering Performance and Dividends"

[Asia Economy Reporter Eunmo Koo] Verizon maintained stable wireless business revenue in the first quarter of this year despite the impact of the novel coronavirus disease (COVID-19). Considering its performance and dividends, it is evaluated to have high investment attractiveness.

On the 30th, Hana Financial Investment rated Verizon's investment attractiveness as "high." Hongshik Kim, a researcher at Hana Financial Investment, explained in a report on the same day, "The increase in LTE unlimited data plan subscribers and the full-scale migration of subscribers to 5th generation mobile communication (5G) are expected to sustain the upward trend of wireless ARPA, and the upselling effect of plans is anticipated due to increased traffic caused by COVID-19."

He continued, "Based on the quarterly dividend policy and excellent cash flow, the dividend merit is expected to be highlighted. Compared to AT&T, Verizon's higher proportion of wireless communication business is also an attractive factor, as it is expected to benefit relatively more from the expansion of 5G penetration." Additionally, considering the expected dividend yield of 4.3% and a price-earnings ratio (PER) of about 12 times this year, the valuation attractiveness is also rated high.

Verizon posted an overall sluggish performance in the first quarter of this year due to the impact of COVID-19, but its wireless business maintained stable results. Verizon's first-quarter revenue was $31.6 billion, down 1.6% year-on-year, and operating profit was $6.6 billion, down 14.7%, falling short of market expectations. Researcher Kim analyzed the reasons for the poor performance, stating, "Store closures due to COVID-19 led to sluggish new subscriber acquisition, one-time costs such as bad debt write-offs occurred, and advertising revenue in the media business declined due to the overall contraction of the advertising market."

However, wireless business revenue remained stable, with first-quarter mobile phone revenue growing 1.9% year-on-year to $16.4 billion. Kim explained, "The increase in subscribers to high-priced LTE unlimited data plans continued, and the use of second devices increased, sustaining the upward trend of wireless ARPA."

Verizon's long-term stock price outlook was also positively evaluated based on solid mobile phone revenue. Researcher Kim stated, "Contrary to market concerns, it is highly likely that there will be no contraction in 5G investments by U.S. telecom companies due to COVID-19," and added, "It is rather time to focus on the upselling effect of plans due to increased traffic."

He further said, "Considering that Verizon's wireless data traffic increased by 9% compared to before due to COVID-19 and that consumers are unlikely to reduce the increased traffic again, long-term growth in mobile phone revenue is expected." He also added that the expected launch of the 5G iPhone in the second half of this year is a factor that raises expectations for 5G subscriber growth.

This content was produced with the assistance of AI translation services.