Verizon (VZ): Buy, Sell, or Hold Post Q1 Earnings?

Over the past six months, Verizon has been a great trade. While the S&P 500 was flat, the stock price has climbed by 5.4% to $44.25 per share. This performance may have investors wondering how to approach the situation.

Is there a buying opportunity in Verizon, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think Verizon Will Underperform?

We’re happy investors have made money, but we're cautious about Verizon. Here are three reasons why there are better opportunities than VZ and a stock we'd rather own.

1. Customer Base Hits a Plateau

Revenue growth can be broken down into the number of customers and the average spend per customer. Both are important because an increasing customer base leads to more upselling opportunities while the revenue per customer shows how successful a company was in executing its upselling strategy.

Over the last two years, Verizon’s total customers were flat, coming in at 146 million in the latest quarter. This performance was underwhelming and shows the company faced challenges in landing new contracts. It also suggests there may be increasing competition or market saturation.

2. Cash Flow Margin Set to Decline

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Over the next year, analysts predict Verizon’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 15.3% for the last 12 months will decrease to 13.3%.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Verizon’s ROIC decreased by 3.9 percentage points annually over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

Verizon doesn’t pass our quality test. With its shares outperforming the market lately, the stock trades at 9.4× forward P/E (or $44.25 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.

Stocks We Would Buy Instead of Verizon

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.