What happened
Shares of telecom giant Verizon (VZ 0.42%) were rising today, up as much as 3.3% before settling into a 2.5% gain on the day.
While the markets were broadly positive, Verizon's outsized gains were likely due to its CEO's appearance at a Citigroup telecom and technology conference today, during which CEO Hans Vestberg had positive things to say about the recently concluded fourth quarter.
So what
Without giving too many details, Vestberg stated that the company saw positive net additions in the fourth quarter, and that store traffic had increased compared with prior periods. Moreover, Vestberg said customers are paying bills on time, despite macroeconomic uncertainty.
Earlier this year on its second-quarter 2022 earnings release, rival AT&T had said that it had seen an uptick in its customers not paying their bills. However, it appears Verizon either appeals to more creditworthy customers, or that the easing of inflation and fuel prices between the second quarter and today has been helpful for consumers to pay their monthly phone bills.
Either way, it's a good sign, and the traffic increases are also welcome. Verizon lagged major rivals last year in net additions, with a cumulative 16,000 net postpaid subscriber loss through the first three quarters of 2022. And Verizon's consumer segment had been even worse, as business customer additions help buoy even those anemic figures.
Therefore, to hear positive commentary on customer additions for the fourth quarter was a nice reprieve for Verizon, which has seen its stock fall 22% over the past year.
Now what
After a down year, Verizon still yields 6.6%, which is a fairly hefty dividend yield and could be attractive to yield-seeking investors.
Still, there is much uncertainty around Verizon, even after today's positive commentary. While net additions may improve, did Verizon have to dole out hefty promotions in order to lure in customers? We won't find out until the company's earnings report later this month. Moreover, can Verizon, which held the leading network in the 4G era, catch up to T-Mobile, which assumed leadership in 5G coverage and led the industry in customer additions last year?
These are some of the lingering questions surrounding Verizon, and part of the reason why the stock trades at such a low valuation. It's likely investors will be able to depend on Verizon's yield as a sort of bond substitute, but given the competitive challenges in the telecom space today, it may be hard for Verizon to deliver meaningful share price appreciation unless interest rates fall significantly.
