Telecommunications companies have to adapt to a rapidly changing and increasingly competitive market to keep profiting. Today we report on one telecom that is adding new growth markets with the help of a recent acquisition. Verizon Communications provides wireless, high-speed Internet and TV services, and also serves telephone customers with traditional land lines. Verizon’s purchase of AOL, which operates popular websites such as The Huffington Post, TechCrunch and Engadget. The acquisition also gives Verizon unique technology that allows advertisers to more carefully target their online ads. Using this software, Verizon launched a free app that allows users to watch videos on their cell phones—a high-demand and growing service that should bring in more ad revenue. The company offers a high dividend yield of 4.8% and is trading at only 11.8 times its expected earnings. We view Verizon as a value stock to buy for conservative investors.
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This telecom’s recent acquisition cuts its reliance on traditional telephones and lets it profit from growing markets and high-demand services, such as mobile video.
VERIZON COMMUNICATIONS INC. (New York symbol VZ; www.verizon.com) has 110.8 million wireless users, 18.7 million traditional phone clients and 19.7 million high-speed Internet and TV subscribers.
The company recently paid $4.4 billion for AOL, which operates several popular websites, including The Huffington Post, TechCrunch and Engadget.
Verizon has since launched go90, a free app that lets users watch videos on mobile devices. This service incorporates AOL’s unique technology, which uses analytics software to place ads on websites. That should help it attract advertisers and offset its costs.
Value stocks: Profits rise on growth in wireless sales
Meanwhile, Verizon’s earnings rose 16.9% in the three months ended September 30, 2015, to $1.04 a share from $0.89 a year earlier. Overall revenue gained 5.0%, to $33.2 billion from $31.6 billion, as a 5.4% rise in wireless sales offset a 2.3% decline from its other services.
Verizon ended the latest quarter with long-term debt of $105.1 billion, or a manageable 55% of its market cap. It also held cash of $4.2 billion.
The company will likely earn $3.97 a share in 2015, and the stock trades at 11.8 times that figure. The $2.26 dividend yields 4.8%.
Recommendation in Wall Street Stock Forecaster: BUY
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