Verizon's Earnings Loom: Is This Dip a Buying Opportunity?

Investors, let’s cut to the chase: Verizon (VZ) is set to report Q1 earnings on April 22, and its stock is down 2.5% in recent trading. But here’s the thing—this telecom giant has a track record of beating earnings expectations, and its valuation is screaming “discount.” Is this a moment to buy the dip, or is Verizon’s underperformance a sign to stay on the sidelines? Let’s break it down.

First, let’s visualize where Verizon stands against its rivals. . While AT&T is up 18% and T-Mobile 15%, Verizon’s 11% gain looks sluggish. But here’s the kicker: Verizon’s stock trades at a forward P/E of 9.28—far below the industry average of 14.13. That’s a red flag for some, but for bargain hunters, it’s a flashing neon sign.

Now, let’s talk earnings. Analysts are expecting $1.15 EPS for Q1, in line with last year’s results. But Verizon has a habit of beating these numbers. Over the past four quarters, it’s averaged a 1.33% EPS surprise, with its last report exceeding estimates by 0.92%. If history repeats, this quarter could deliver another modest beat—especially since Zacks’ ESP model gives it a +0.10% edge. But remember: even a “beat” won’t erase the fact that revenue growth is flat.

So what’s driving this? Let’s start with Verizon’s consumer segment. The company is pushing bundled deals—$15/month for combined mobile and home internet, plus $10/month credits for streaming services. These promotions are aimed at countering AT&T’s aggressive pricing, but they’re also squeezing margins. Meanwhile, the Business segment is where the action is: Verizon’s AI-powered customer service (Verizon Business Assistant) and cybersecurity deals with Accenture and Honeywell could be the real growth drivers.

But here’s the catch: Verizon’s wireline business is a drag. Fios Video is losing subscribers to streaming, and capital spending on 5G and fiber is eating into profits. The company spent $8.7 billion on capex last year—up 10% from 2023—and that’s not slowing down. Investors need to ask: Is Verizon investing for the future, or is this a cash drain?

The bulls will point to Verizon’s defensive qualities. With a 5.3% dividend yield, it’s a haven in volatile markets. Plus, Evercore ISI just upgraded it to “Outperform,” citing progress in postpaid subscriber growth and broadband targets. The bears? They’ll highlight the wireline struggles and the fact that Verizon’s stock is still 12% below its average analyst target of $47.90.

So where does this leave us? Let’s crunch the numbers. If Verizon hits its Q1 estimates, it’ll mark five straight quarters of EPS beats. That’s no small feat. And while revenue growth is flat, the company’s focus on high-margin business services and 5G could finally start paying off. Remember, 5G adoption is still in early days—Verizon’s fixed wireless broadband, which doesn’t require fiber installation, could be a game-changer in rural markets.

The risks? Margin pressure from promotions, macroeconomic slowdowns, and the relentless competition from AT&T and T-Mobile. But here’s the deal: Verizon’s stock is priced for disappointment. At $42.93, it’s offering a 12% upside to that $47.90 target—and that’s before any upside surprises.

In conclusion, Verizon is at a crossroads. Its stock is cheap, its dividend is solid, and its strategic bets on AI and 5G have legs. But the wireline drag and margin issues aren’t going away fast. However, with a consistent earnings beat streak and a Zacks Rank #3 (Hold) that historically boosts beat probabilities, this could be a “hold” that turns into a “buy” if the earnings report confirms execution.

Investors: This isn’t a “home run” stock. But if you’re playing defense in this market and want exposure to telecom’s future, Verizon’s dip before earnings might just be your entry point. Just don’t expect fireworks—this is a grind-it-out play. And in a world of uncertainty, sometimes that’s exactly what you need.

Stay tuned—earnings are coming. This could be a make-or-break moment for Verizon’s stock.