To The Moon

$Verizon(VZ)$ is scheduled to release its fiscal Q2 2025 earnings on 21 July 2025 before market open.

Consensus estimates:

EPS: $1.18 (up 2.6% YoY). Tipranks give the consensus estimate for earnings per share (EPS) at $1.19 per share.

Revenue: $33.57B

Bullish Catalysts: Continued 5G monetization and premium plan upgrades, FWA expansion in rural and underserved markets, Cost discipline and margin expansion and Dividend yield of 6.5% with a payout ratio of 64.5%

Risks: Elevated churn from pricing actions, Tariff uncertainty on handsets and telecom equipment and Competitive pressure from AT&T and T-Mobile

Summary of VZ Fiscal Q1 2025 Earnings (April 22, 2025)

Verizon delivered a relatively strong financial performance in Q1 2025, exceeding analyst expectations on both EPS and revenue, though the stock saw a slight dip in pre-market trading, likely due to concerns over postpaid phone net losses.

Key Highlights:

Total Operating Revenue: $33.5 billion, up 1.5% year-over-year, slightly exceeding expectations.

Adjusted EPS: $1.19, surpassing the forecast of $1.15.

Wireless Service Revenue: $20.8 billion, up 2.7% year-over-year, at the higher end of their guided range. This was a significant positive.

Adjusted EBITDA: $12.6 billion, a record high and up 4% year-over-year, exceeding their guided range.

Free Cash Flow: $3.6 billion, a substantial increase of over $900 million from Q1 2024.

Broadband Net Additions: 339,000, including 199,000 fixed wireless net additions and 41,000 Fios Internet net additions. Total broadband connections grew 13.7% year-over-year.

Consumer Wireless Retail Postpaid Phone Net Losses: 356,000. This was a point of concern, attributed partly to elevated churn due to recent price increases and pressure from federal government accounts. However, the company noted positive sales momentum exiting the quarter and into April.

Business Wireless Retail Postpaid Net Additions: 94,000, including 67,000 postpaid phone net additions.

Confidence in Full-Year Guidance: Verizon reiterated its confidence in achieving its 2025 financial guidance, focusing on growing wireless service revenue, expanding adjusted EBITDA, and increasing free cash flow.

Strategic Progress: Accelerated broadband expansion, announced AI Connect offerings, and secured satellite partnerships.

In summary, Q1 2025 showed solid financial growth driven by wireless service revenue and strong profitability, but customer growth in the consumer postpaid phone segment remained a challenge.

Key Factors and Metrics Investors Need to Watch:

Wireless Service Revenue Growth: This remains the core driver for Verizon. Investors will be looking for continued healthy growth in wireless service revenue, similar to or exceeding the 2.7% year-over-year increase seen in Q1 2025. This indicates the company's ability to maintain and grow its subscriber base and average revenue per user (ARPU).

Postpaid Phone Net Additions/Losses: This is a crucial metric for subscriber growth and market share. While Q1 2025 saw 356,000 postpaid phone net losses in the consumer segment (partially offset by business segment additions), investors will be keen to see if Verizon can reverse this trend or at least significantly reduce losses in Q2. Churn rates, particularly in the consumer segment, will be closely scrutinized.

Broadband Net Additions (Fixed Wireless Access and Fios): Verizon has been actively expanding its broadband offerings, especially Fixed Wireless Access (FWA). The 339,000 broadband net additions in Q1 2025 were a positive sign, and continued strong performance here is essential for diversifying revenue streams and leveraging their 5G network.

Adjusted EBITDA and Margins: As a measure of operational profitability, adjusted EBITDA is critical. Q1 2025 saw a record adjusted EBITDA of $12.6 billion, up 4% year-over-year. Investors will be looking for sustained or improved EBITDA margins, indicating effective cost management and operational efficiency.

Free Cash Flow (FCF): Strong free cash flow is vital for dividend payments, debt reduction, and future investments. The significant increase in FCF in Q1 2025 ($3.6 billion, up from $2.7 billion in Q1 2024) was a positive. Investors will want to see this trend continue.

Capital Expenditures (CapEx): While essential for network expansion (especially 5G and fiber), investors will watch for controlled CapEx to ensure efficient allocation of resources and positive free cash flow generation.

Guidance for Full Year 2025: Any updates to the full-year financial guidance will be closely analyzed. This includes projections for wireless service revenue growth, adjusted EBITDA, and free cash flow.

Progress on Strategic Initiatives: Updates on the C-band deployment, Fios expansion, and the impact of new offerings (like "My Biz Plan" for small and medium businesses, and AI Connect offerings) will be important indicators of future growth.

Competitive Landscape: Comments on the competitive environment and any impact from rival offerings will be key. Pricing strategies and promotional activities from competitors can influence Verizon's subscriber trends and ARPU.

Investor Metrics to Watch in Q2

Simulating VZ's "Barbell Sleeve" Shift Under Different Macro Outcomes

The concept of a "barbell sleeve" for a company like Verizon typically refers to its strategic positioning, combining stable, defensive assets (the "barbell" ends) with more growth-oriented, potentially volatile ventures (the "sleeve" or middle). For Verizon, this broadly translates to:

"Barbell" (Defensive Core): This represents its traditional, mature, and highly stable wireless and wireline connectivity business. These provide consistent revenue and cash flow, acting as a defensive hedge during economic downturns due to the essential nature of their services.

"Sleeve" (Growth Initiatives): This encompasses newer, higher-growth areas like 5G Fixed Wireless Access (FWA), private networks, edge computing, IoT, and potentially AI-driven services. These initiatives aim to capture new market opportunities and drive future growth beyond saturated core markets.

Here's how Verizon's "barbell sleeve" might shift under different macroeconomic outcomes:

1. Strong Economic Growth (High GDP Growth, Low Unemployment, Moderate Inflation):

Shift: The "sleeve" would likely expand and become more prominent.

Impact: Core Business (Barbell): Continues to generate stable cash flow. Consumer and business spending might allow for slight ARPU increases, and churn could remain low as people are less inclined to switch providers for minor savings.

Growth Initiatives (Sleeve): This is where Verizon would see significant upside.

FWA: Continued strong adoption as consumers and businesses seek alternatives to traditional broadband, fueled by increased disposable income and business expansion.

Private Networks/IoT/Edge Compute: Businesses accelerate digital transformation initiatives, leading to higher demand for these advanced connectivity solutions. Verizon's enterprise segment (Verizon Business) would see robust growth.

AI Connect Offerings: Increased enterprise investment in AI would drive demand for Verizon's connectivity and compute offerings tailored for AI.

Investment Strategy: Verizon might accelerate CapEx in growth areas, potentially acquiring smaller innovative companies, and invest heavily in 5G expansion to capture market share in high-growth segments.

Financials: Revenue growth would likely accelerate beyond current expectations, with healthy EBITDA and strong free cash flow, potentially leading to share buybacks or increased dividends.

2. Moderate Economic Growth (Stable GDP, Moderate Unemployment, Controlled Inflation):

Shift: A balanced approach, with both the "barbell" and "sleeve" contributing steadily.

Impact: Core Business (Barbell): Remains foundational, providing consistent revenue and cash flow. Modest ARPU growth.

Growth Initiatives (Sleeve): Continue to grow, but perhaps at a more measured pace than in a booming economy.

FWA: Steady adoption, but perhaps less aggressive market share gains as competition remains keen.

Private Networks/IoT/Edge Compute: Gradual, consistent growth as businesses cautiously invest in digital transformation.

AI Connect Offerings: Slow and steady adoption as companies gradually explore AI integration.

Investment Strategy: Verizon would likely maintain its planned CapEx, focusing on optimizing existing assets while selectively investing in the most promising growth opportunities. Financial discipline remains a key focus.

Financials: Consistent, moderate revenue and earnings growth in line with or slightly above current guidance. Stable dividends.

3. Economic Downturn/Recession (Negative GDP Growth, Rising Unemployment, Potential Deflation/Stagflation):

Shift: The "barbell" would become the primary focus, acting as a defensive anchor, while the "sleeve" might contract or slow significantly.

Impact: Core Business (Barbell): Demonstrates its defensive strength. Wireless and broadband services are essential, so demand remains relatively inelastic. However, consumers might "trade down" to cheaper plans or look for more aggressive promotions, impacting ARPU. Churn could increase as consumers become more price-sensitive.

Growth Initiatives (Sleeve): These would face headwinds.

FWA: While still a viable option, competitive pricing pressures would intensify.

Private Networks/IoT/Edge Compute: Businesses would cut discretionary spending, potentially delaying or reducing investments in these areas. Verizon Business segment growth could slow considerably.

AI Connect Offerings: Adoption could be postponed as companies prioritize cost-cutting.

Investment Strategy: Verizon would likely cut back on non-essential CapEx, prioritize debt reduction and dividend sustainability, and focus on operational efficiency and cost control within its core business. Acquisitions would be less likely.

Financials: Revenue growth might slow significantly or even turn negative. Earnings could be pressured, though the defensive nature of the core business would likely prevent a steep decline. Free cash flow might be diverted more towards debt servicing.

4. High Inflationary Environment (Persistent High Inflation, Stagnant Growth - Stagflation):

Shift: Similar to a downturn, the "barbell" becomes critical for stability, but with added pressure on costs.

Impact: Core Business (Barbell): Revenue might see some uplift from price increases, but these could be met with consumer resistance and increased churn. Operating costs (e.g., labor, equipment, energy) would rise, compressing margins.

Growth Initiatives (Sleeve): Investment in these areas would become more expensive due to rising material and labor costs. Adoption rates might slow if businesses are also battling inflation.

Investment Strategy: Focus on managing rising costs, potentially passing some onto consumers (risking churn). Capital allocation would be prioritized towards essential maintenance and profitable core network upgrades, with new growth initiatives scrutinized more heavily for immediate returns.

Financials: Revenue growth could be decent, but profitability (EBITDA margins, net income) would likely be squeezed due to higher input costs. Free cash flow could be pressured as well.

Verizon (VZ) Price Target

Based on 23 analysts offering 12 month price targets for Verizon in the last 3 months. The average price target is $47.81 with a high forecast of $55.00 and a low forecast of $43.00. The average price target represents a 16.75% change from the last price of $40.95.

Technical Analysis - Exponential Moving Average (EMA)

Based on the technicals, we are seeing VZ in a downwards movement, and the positive momentum is displaying, the bears are now in control, so if the concerns of pricing action and tariffs impact continued to affect VZ, we could be seeing a decline post earnings.

This might create a good opportunities to buy in, if there is any positive recourse on the tariffs, which could take away investors concerns.

Barbell Sleeve Comparison: VZ vs. T vs. TMUS

Risk-adjusted metrics:

• $T-Mobile US(TMUS)$ leads in Sharpe, Sortino, and Calmar ratios

• VZ offers lower volatility and drawdowns, ideal for defensive tilt

• $AT&T Inc(T)$ sits between the two, with improving total return and fiber-driven upside

🧪 Macro Regime Tilt: Comparative Allocation

🟢 Soft Landing / Reflation

• TMUS: Growth + Optionality overweight

• VZ: Balanced barbell

• T: Growth tilt via fiber densification

🔴 Stagflation / VIX Spike

• VZ: Yield-heavy barbell

• T: Defensive yield + fiber optionality

• TMUS: Growth sleeve muted, optionality trimmed

🟡 Tech-led Recovery

• TMUS: Full risk-on barbell (AI, edge, net adds)

• VZ: Optionality sleeve expands via enterprise 5G

• T: Growth sleeve accelerates via bundling and fiber

Summary

Analysts generally hold a cautiously optimistic view on Verizon, with some issuing "Buy" or "Outperform" ratings and price targets ranging from $43.0 to $56.0. The company is often viewed as a value play due to its lower P/E ratio compared to the industry average and a relatively high dividend yield.

Recent stock performance from VZ does create some concerns as VZ need to overcome elevated churn from pricing actions, tariff uncertainty on handsets and telecom equipment and competitive pressure from AT&T and T-Mobile.

Verizon's "barbell sleeve" strategy aims to provide stability while pursuing growth. Under different macro outcomes, the emphasis shifts. A strong economy allows the "sleeve" to flourish, while challenging economic conditions necessitate a retreat to the defensive strength of the "barbell." Managing this balance effectively will be crucial for Verizon's performance in Q2 2025 and beyond.

Appreciate if you could share your thoughts in the comment section whether you think VZ would be able to overcome these economic conditions and balance for a more effective earnings performance.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.