VZ vs. CHTR: Which Connectivity Stock is the Better Buy Now?

Verizon Communications Inc. VZ and Charter Communications Inc. CHTR are leading U.S. communication services providers offering broadband and connectivity options. They primarily compete in fixed broadband, wireless services and enterprise connectivity verticals. Operating as one of the premier wireless service providers in the United States, Verizon provides a vast array of communication and business solutions that include wireless, local exchange, long-distance, data/broadband and Internet, video, managed networking, wholesale and cloud-based services.

Charter is the second largest cable operator in the United States and a leading broadband communications company providing video, Internet and voice services. The company serves approximately 57 million customers in 41 states through its Spectrum brand.

Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the broadband and telecom services industry.

The Case for Verizon

Verizon is benefiting from the growing demand for its industry-leading 5G portfolio. With a customer-centric business model, the company delivers faster peak data speeds and capacity for customers, driven by disciplined engineering and steady infrastructure investments. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These include massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.

Verizon is witnessing significant 5G adoption and fixed wireless broadband momentum with premium unlimited plans. It is offering various mix-and-match pricing in both wireless and home broadband plans, which has led to solid customer additions. Moreover, in the enterprise and wholesale business, Verizon is shifting its revenue mix toward newer growth services like cloud, security and professional services. 

Verizon has further expanded Fios Forward to support digital inclusion and provide opportunities for underserved households to thrive in the digital world. With no data caps, Fios customers can experience faster upload and download speeds than any other comparable plans. The telecom giant plans to accelerate the availability of its 5G Ultra Wideband network across the country. The company’s growth strategy includes 5G mobility, nationwide broadband and mobile edge compute and business solutions.

However, the company operates in a highly competitive market and faces competition from other major players, such as AT&T, Inc. T, Charter and T-Mobile US, Inc. TMUS. AT&T is also aggressively expanding its fiber footprint. The company is acquiring Lumen’s fiber business. It is placing a strong focus on the densification of its existing fiber infrastructure. Such initiatives from AT&T can pose a challenge to Verizon’s fiber network expansion. In a bid to expand its customer base, Verizon is spending heavily on promotion and is also offering lucrative discounts, which are weighing on margins.

The Case for Charter

Charter is witnessing growth in residential mobile service and residential Internet services. The company has expanded its 5G coverage nationwide. Its Spectrum Mobile is the core element of Charter’s converged network strategy, which aims to deliver highly competitive, simple data plans and pricing and ensure a premium connectivity experience for end users. The company is increasing collaboration with federal, state and local governments to bring Spectrum Internet to rural and underserved regions.

Charter has pledged to invest $7 billion to add 100,000+ miles of fiber-optic network infrastructure. The company intends to deliver multigigabit and symmetrical Internet services across 1.7 million locations. The company has expanded its gigabit broadband, mobile, TV and voice services in the states of Wisconsin, Tennessee and Indiana. With up to 1 Gbps, advanced Wi-Fi and 100% U.S.-based customer service, the company is steadily expanding Spectrum’s footprint across the country.

Expansion of its network infrastructure is opening up new revenue-generating opportunities. Nexar, a prominent AI-powered mobility solution provider, has opted to leverage Spectrum’s expansive managed wireless network to facilitate faster delivery of roadway insights to the cloud. Successful integration will boost Charter’s prospects in the emerging market of vehicle safety and data-driven mobility infrastructure vertical.

However, the company operates in a fiercely competitive and saturated U.S. wireless market. Streaming services continue disrupting traditional video consumption patterns, while wireless home Internet products offer comparable speeds at lower bundled prices when combined with mobile services. This multi-vector competition forces Charter into defensive pricing strategies that compress margins while requiring increased marketing expenditures to maintain market position in an increasingly saturated broadband market.

How Do Zacks Estimates Compare for VZ & CHTR?

The Zacks Consensus Estimate for Verizon’s 2025 sales and EPS implies year-over-year growth of 2.6% and 2.2%, respectively. The EPS estimate for 2025 has been trending southward (down 0.2%) over the past 60 days.

The Zacks Consensus Estimate for Charter’s 2025 sales and EPS indicates year-over-year growth of 0.1% and 10.7%, respectively. The EPS estimates have been trending northward (up 0.5%) over the past 60 days.

Price Performance & Valuation of VZ & CHTR

Over the past year, Verizon has lost 7.2% compared with the industry’s decline of 1.6%. Charter has plummeted 27.4% over the same period.

Charter looks more attractive than Verizon from a valuation standpoint. Going by the price/earnings ratio, Charter’s shares currently trade at 5.74 forward earnings, lower than 7.87 for Verizon.

End Note

While Charter carries a Zacks Rank #3 (Hold), Verizon has a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Charter has shown steady revenue growth over the past few years, while Verizon has been witnessing a bumpy road. Downtrend in estimate revisions shows dwindling investor sentiment for Verizon. Moreover, Charter appears to have attractive valuation metrics compared with Verizon. With a better Zacks Rank, an aggressive growth path (broadband upgrades + bundling + M&A), CHTR offers more upside potential and appears to be relatively better placed than Verizon. Consequently, Charter is a better investment option at the moment.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research