Verizon's (NYSE: VZ) stock price is amid a technical reversal and will likely advance 45% or more. After years of sluggish growth and uncertainty driven by the pandemic, the 5G industry is set to boom in 2025. The forecast is for widening us driven by increased network availability and use cases facilitated by AI and the IoT. The critical factor with the IoT is the speed of 5G, which allows for real-time interaction with remote devices.
Network growth will be robust, nearly 45% over the next fifteen months, with more than 35% of the world’s population to be covered by the year’s end. The projections surpass the pre-COVID outlook and will likely trend higher as networks and applications develop, which is all good news for 5G service providers like Verizon. As the middleman in the equation, they stand to make the most over the long term, providing access services to the network.
Healthcare and automotive are among the industries that will be impacted. 5G speed will allow real-time, remote monitoring of patients and remote/robotic surgeries, help reduce accidents, improve traffic flow, and reduce costs. The forecasts for IoT device growth are mixed but agree that it is robust, with total device growth to double or more over the next ten years. All those devices will need to be connected to the 5G network.
Verizon Builds Leverage in 2024
Verizon's revenue was less than expected in the first half of 2024 but offset by other factors, including a return to top-line growth and a widening margin. Over the past two years, the company has focused on operational quality and set itself up with leverage to accelerate earnings growth over the next few years as the 5G boom unfolds.
The consensus forecast for 2025 drives the stock price today. Analysts expect sluggish 1.5% revenue growth at the consensus and are likely underestimating the results. This provides the potential for a revision cycle to strengthen the tailwinds analysts already provide. Analyst revisions lifted the sentiment from Hold to Buy over the last year and the price target by 6%. This isn’t a robust figure, but it is leading the market higher and into the high-end range, which adds another 1700 basis points upside potential to the equation.
The institutions also provide a tailwind for Verizon's stock price. They own over 60% of the shares and have bought on balance for three consecutive quarters, the entirety of 2024 year-to-date. Their activity coincides with a bottoming pattern in the stock price.
Verizon’s Capital Return Is a High-Yield Value Today
Verizon’s dividend has a high yield at value prices, paying more than 6%, with shares trading near $44 or less than 10x this year’s earnings. The value play may not last, and the yield will fall as share prices rise, but it is a sustainable payment at less than 60% of the earnings, and the distribution is growing.
Distribution growth isn’t robust but sustainable, and the company is on track for inclusion in the Dividend Aristocrat Index. Inclusion in the index will increase total ownership, support share prices long-term, and reduce volatility in an already low-beta stock.
The price action in VZ shares is more than suggestive. It shows a clear head-and-shoulder pattern with an upside bias. The bias is in the right shoulder, which shows support higher than the left, and in the neckline, which is skewed to the upside.
The critical resistance point is near $46 and may be tested soon. A break at that level would put the market above the midpoint of the long-term range and on track to retest resistance at the high end near $62.
