Time To Consider Going Long Verizon Communications (VZ) - BTIG

(Updated - May 30, 2017 7:23 AM EDT)

With shares of Verizon Communications (NYSE: VZ) down 15% YTD and 20% from its July 2016 peak BTIG analyst Walter Piecyk believes now is the time to go long on VZ even as margins and churn are at record levels and there's a threat of more competition from Sprint Corp. (NYSE: S) and T-Mobile (NASDAQ: TMUS).

Piecyk said a potential Sprint/T-Mobile deal could act as a notable positive catalyst for Verizon's stock and the risk of a negative catalyst from a large dilutive acquisition by Verizon appears to be reduced based on management comments and following the agreement signed between Charter and Comcast to work together on wireless. He also said the 5% dividend yield is attractive.

"We therefore acknowledge that the set-up for Verizon's stock is very tempting to take a shot on the long side and we discuss below how investors could take the stock up to $51. However, we are once again cutting estimates...and believe there is a longer term risk to dividend growth."

He tells clients there is still a reasonable chance VZ acquires someone and he does not rule out Charter Communications (NASDAQ: CHTR). The analsyt is also cutting estimates once again, and said if it becomes clear that SoftBank is unable to entice Deutsche Telekom into a merger between Sprint and T-Mobile, Verizon's stock could experience additional pressure. In addition, the threat of a new, well-funded entrant into the wireless industry cannot be ignored.

"...we still believe there is a reasonable chance that Verizon does attempt a large transaction and do not rule out Charter, regardless of its agreement with Comcast."

He lowers FY 2017 EPS estimate from $3.84 to $3.63 and lowers FY 2018 EPS estimate from $3.56 to $3.42.

Despite the positive comments, the analyst remains Neutral on VZ given the risks outlined above.

For an analyst ratings summary and ratings history on Verizon Communications click here. For more ratings news on Verizon Communications click here.

Shares of Verizon Communications closed at $45.32 Friday.

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