Competitive Pressure Keeps Goldman Sidelined On Verizon Shares

Verizon Communications Inc. (NYSE: VZ) shares were trading down once again on Friday following a disappointing Q3 earnings report. Goldman Sachs analyst Brett Feldman remains on the sidelines when it comes to Verizon stock as wireless competition heats up.

One of the major tripping points for Verizon in Q3 was a surprise 36,000-subscriber postpaid phone loss. In addition, the market didn’t appreciate Verizon’s wireless EBITDA miss. The company reported $9.93 billion in wireless EBITDA compared to consensus estimates of $10.06 billion.

According to Feldman, Verizon will likely continue to be squeezed by the competition.

“Our 2016E EPS of $3.88 (old $3.87) is below guidance of approx. $3.92 as we expect 4Q pressures on wireless margins on escalating competition,” he explained.

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It wasn’t all bad news for Verizon in Q3, however. Feldman noted that the company’s average revenue per account (ARPA) of $144.94 beat Goldman’s estimate of $194.

Feldman also pointed out that wireline margins came in 1 percent above Goldman’s 20 percent estimate due to cost efficiencies.

Despite Goldman’s one-cent increase in 2016 EPS estimates, the firm maintains its 2017 EPS target of $3.96, implying 2.2 percent earnings growth next year. In addition, Goldman is predicting 2017 revenue growth of 1.2 percent.

Goldman maintains a Neutral rating on Verizon and a $51 price target for the stock.

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