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Are the Bears Closing in on Telecom Stocks?

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Are the Bears Closing in on Telecom Stocks? PART 1 OF 6

How the Stock Market Fall Impacted Verizon Stock

US equity markets fell 10%

According to closing prices on February 8, 2018, US equity markets have gone through a correction. In financial markets, a 10% collapse from a recent high is considered a correction.

For US indexes, January 26 was the day that markets closed at the highest level. The S&P 500 (SPX-INDEX) closed at 2,873—the highest level ever seen for the index. The Dow Jones Industrial Average (DJIA-INDEX) closed at 26,617, while the NASDAQ Composite (COMP-INDEX) closed at 7,506. On February 8, these indexes fell to 2,581, 23,860, and 6,777, respectively—a nosedive of nearly 10% since January 26.

How the Stock Market Fall Impacted Verizon Stock

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How the Stock Market Fall Impacted Verizon Stock

According to many analysts, rising inflation expectations and the possibility of a faster pace of rate hikes caused the sudden fall.

Meanwhile, Verizon Communications (VZ) was trading at $49.04 by the end of February 8, which represents a decline of ~10.4% from its closing price on January 26. The telecom company’s stock price has now fallen ~6.4% in the trailing-one-month period as of February 8, 2018, wiping out all of January’s gains.

Verizon released its 4Q17 and 2017 financial results on January 23, 2018. It posted adjusted EPS (earnings per share) of $0.86 in 4Q17—flat on a YoY (year-over-year) basis. The company recorded total revenues of $34.0 billion in 4Q17, which was ~5.0% higher YoY.

For fiscal 2017, Verizon’s revenues rose ~0.1% over fiscal 2016. Its adjusted EPS, however, fell significantly during the period. In 2017, Verizon’s adjusted EPS was $3.74, compared with $3.87 in 2016.

Looking beyond the carrier market

Although acquisitions, including its purchase of Yahoo, hit Verizon’s bottom line in 3Q17, these will be important to the company’s ambitions of expanding beyond its traditional wireless carrier market. Verizon and AT&T (T) have been procuring media assets as they eye opportunities in the online advertising space and try to mitigate disruptive competition from smaller competitors like T-Mobile (TMUS) and Sprint (S).

Notably, AT&T appears to be on track to acquire CNN owner Time Warner (TWX) for $85.4 billion as part of its media build-out. But Verizon has already acquired AOL and Yahoo and has gone on to launch a media and advertising unit named Oath.

In the next part of this series, we’ll discuss how the stock market has affected AT&T stock.

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