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blue-chip

Two NYSE-Listed Large-Cap Stocks in the Buy Zone – VZ, PLTR

Dec 22, 2021 | Team Kalkine
Two NYSE-Listed Large-Cap Stocks in the Buy Zone – VZ, PLTR

Verizon Communications Inc.

VZ Details

Verizon Communications Inc. (NYSE: VZ) is a company that makes and sells goods and services in communication, information, and entertainment. Its operating segments are 1) Verizon Consumer Group, which provides cellular and landline communications services to individual customers, and 2) Verizon Business Group, which provides business and government customers and wireline carriers with wireless services such as data, video, and conferencing, corporate networking solutions, security and managed network services, local and long-distance phone services, and others. As of December 21, 2021, the company’s market capitalization stood at USD 219.80 billion.

Latest News:

  • Recent Partnership:  VZ announced on December 16, 2021, that it would expand its partnership with the Los Angeles Unified School District, the nation's second-largest school district, to provide eligible Nevada families and individuals with discounted mobile broadband, voice service, and equipment through Nevada state, local, and select non-profit institutions.
  • Delivering 5G edge computing: VZ and Google Cloud collaborated on December 16, 2021, to bring the cloud's power closer to mobile and connected devices at the edge of VZ's network. VZ 5G Edge, in collaboration with Google Distributed Cloud Edge, aims to offer computing and storage capabilities to the network edge, enabling real-time enterprise applications.

Q3FY21 Results:

  • Slight Growth in Topline: The company reported YoY growth of 4.35% in revenues to USD 32.92 billion during Q3FY21 (ended September 30, 2021) from USD 31.54 billion during Q3FY20, attributable to an increase in its consumer segment.
  • Expansion of Net Income: The company's net income increased to USD 6.55 billion in Q3FY21 from USD 4.50 billion in Q3FY20.
  • Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents of USD 9.94 billion and total debt of USD 150.98 billion.

Key Risks:

  • Vendor Concentration Risk: VZ's essential equipment requirements are met by a limited number of manufacturers and providers. Furthermore, the chipset utilized in manufacturing its smartphone and other devices is supplied by a single manufacturer. As a result, any breach of contract by these third parties could jeopardize the company's operations.

Outlook:

  • FY21 Estimates: For FY21, VZ expects YoY growth of ~4% in its wireless service revenue, along with an adjusted EPS in the range of USD 5.35 – 5.40. It also expects to incur a capital expenditure of USD 17.5 – 18.5 billion in FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.