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Verizon Shares Fall After Revamped Guidance

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A day after AT&T shares tanked after reducing free cash flow guidance for the year, rival telco Verizon Communications watched its stock near its four-year low on Friday after telling investors it, too, won’t meet its earlier financial targets.

Verizon shares fell as low as $44.38 each, down 7% or $3.28 per share. The decline came after Verizon said in its Q2 earnings release that it would reduce full-year cash flow guidance from 2%-to-3% growth to a 1.5% decline, and earnings per share would be in the range of $5.10 to $5.25 per share instead of earlier targets of $5.40 to $5.55 per share. In addition, Verizon said wireless service revenue would grow 8.5% to 9% for the year, instead of 9% to 10%, while other service revenue should be down 1% to flat, below earlier targets of flat growth.

The guidance reduction comes after AT&T said on Thursday it would miss its previous full year free cash flow target, sending its stock down as much as 10% for the day. Shares closed July 21 down about 7%, and fell another 3% on Friday.

The missed guidance for Verizon compounded what was a disappointing quarter for the telco. Verizon added 268,000 broadband customers, 256,000 of which were fixed wireless subscribers. Fios additions at 36,000 for the period were below some analysts estimates of 45,000 additions. But the company also reported it lost 215,000 postpaid wireless customers in the period, more than four times some analysts estimates of a loss of 60,000 customers. In a research note Friday, Barclays Group media and telecom analyst Kannan Venkateshwar, who earlier in the day lowered his rating on AT&T to “equal weight” from “overweight” and reduced his price target on the stock to $20 per share, said Verizon’s wireless performance could potentially make the first half of 2022 its worst ever.

“More importantly, there isn’t an easy path to turning this around given the company’s market positioning as the highest priced provider in a saturated market with growing low-priced competition and increasingly challenged macro backdrop,” Venkateshwar wrote. “Not surprisingly, the company announced a lower priced entry tier recently but this may merely turn out to be a tool to offset elevated churn due to recent price increases across the entire base, the impact of which is likely to be seen in 3Q.” ■

Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.