A Bullish Storm Is Brewing for High-Yield Verizon’s Share Price

Key Points

• Verizon's beat-and-raise quarter affirms the outlook for capital return and capital return growth. 
• Trading at roughly 9x its earnings, this stock yields more than 6.5% in late July and is expected to increase its distribution annually.
• Analysts are leading this market to multi-year highs likely reached by the end of 2025 or early 2026.

Numerous factors, including Verizon’s NYSE: VZ valuation, yield, business traction, and analysts' sentiment, are aligning, setting the stock price up for a significant advance. Verizon’s 5G networks are gaining traction with consumers and businesses, revenue is growing, cash flow is improving, and the capital return is increasing annually.

The critical factors are cash flow, free cash flow, and capital return. Verizon is a deep-value, high-yield stock that yielded more than 6% as of late July. It is on track for inclusion in the Dividend Aristocrats Index within a handful of years. 

The highlight from Q2 is that margins improved throughout the report for this telecom company. The company’s EBITDA (earnings before interest, taxes, depreciation, and amortization), adjusted EBITDA, earnings, cash flow, and free cash flow all improved compared to last year and at an accelerated pace relative to revenue. 

The net result is that the company improved its balance sheet condition in the first half while paying the dividend, and improvements are expected to continue as the year progresses.

The balance sheet reflects reduced cash and assets at the end of Q2, offset by a more significant reduction in liabilities, improved leverage, and a 4% increase in equity. 

Price action following the report is bullish. The market advanced nearly 5% at the close of the session, indicating support at a critical level and a high likelihood of advancing. Bullish signals include a spike in trading volume, an advance from the six-day EMA, a bullish crossover in the stochastic, and an almost-crossover in the MACD.

The crossovers are particularly telling; assuming MACD completes its crossover, the pair will form a strong signal, with both lows in their respective ranges, indicating a move to the top of the long-term range is likely. 

Verizon Wows Market With Beat and Raise Quarter

Verizon had a solid Q2 with revenue growing by 5% and outpacing the consensus estimate by 235 basis points. The strength was driven by all segments, with gains in the core wireless segment led by equipment. Equipment sales topped 25% year-over-year growth, offset by a smaller 2.2% in services.

Net additions were good across the network. FIOS continues to gain traction and is on track to reach its goals. The only bad news is that the net additions are slowing. However, sustained growth, better-than-expected quarterly numbers, and increased market share offset the slowdown. 

The margin news is good. The company has been working on its operational quality for years, and the tailwind was amplified by favorable tax news. The takeaway is that earnings and free cash flow are growing faster than the pace of capital return growth, which has been approximately 2% over the past three to five years.

The company is well-positioned to continue paying its distribution and sustaining the growth pace well into the next decade, likely for longer. 

Guidance is another factor expected to propel this market higher in the second half of 2025. The company raised its outlook for margin and earnings, positioning the midpoint above MarketBeat’s reported consensus.

Based on the trends and expected surge in IoT growth predicted for this year, the company may outperform this target. The growth of the IoT will be underpinned by AI and the proliferation of AI-enabled applications, particularly among businesses. 

Robust Analyst Trends Will Strengthen in Q3

The analysts' trends were robustly bullish leading up to the Q2 release and are likely to remain so in Q3. They include increasing coverage, firming sentiment with the Moderate Buy rating edging toward an outright Buy, and an uptrend in the price target.

The consensus price target is of interest because it was $47 in late July, sufficient to match recent highs, and the trend suggests a move into the high-end range. Recent revisions put this market in the mid-$50 range, a 30% increase and a three-year high when reached.