Telecom giant Verizon Communications (NYSE: VZ) was looking somewhat diminished on the penultimate trading day of the week, at least on the stock exchange. The company's share price took a more-than 2% hit on Thursday "thanks" to the move of one analyst tracking its fortunes. This was contrasted by the S&P 500 index having a slightly upbeat session, ultimately closing 0.2% higher on the day.
Well before the opening of Thursday's market action, KeyCorp's Brandon Nispel changed his recommendation on Verizon's stock to sector weight (hold, in other words) from his previous overweight (buy). Nispel did not set a price target.
Not coincidentally, the analyst's move comes mere days after Verizon reported its third-quarter results. According to reports, Nispel pointed out that the performance of the big telecom for the period was below his expectations. Looking forward, he said that there is little room for significant improvement in earnings before interest, taxes, depreciation, and amortization (EBITDA).
More critically for a business operating in a high-cost environment, free-cash-flow (FCF) growth looks as if it will decline, Nispel wrote.
The prognosticator also expressed dissatisfaction with Verizon's splashy, pending acquisition of peer Frontier Communications Parent. In his view, this is not a wise deployment of precious capital and could limit the scope for Verizon to continue operating meaningful share-repurchase programs.
Personally, I don't share his increasingly bearish view. Verizon is a top operator in the modern telephony space and is doing well with next-generation services. I feel it will continue to be an important player in its industry on the foundation of a massive user base and the provision of services that are essential in the modern world.
Before you buy stock in Verizon Communications, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Verizon Communications wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $855,238!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.