By Neal Rau
Verizon Communications Inc. (NYSE:VZ) announced recently that it was going to issue bonds to help finance its acquisition of a stake in Verizon Wireless. The $49 billion bond offering ended up being much larger than Apple Inc.'s (NASDAQ:AAPL) record $17 billion offering in April. Now, Verizon controls the biggest 4G LTE network in the United States. Shares of Verizon are down over 5% in the last month, and trading near long-term support. Is the stock a buy, sell or hold?
Verizon has one of the largest global networks, including one of the most sophisticated networks with 100G technology deployed on multiple routes in the U.S. and Europe. Rumors were swirling that Verizon was going to be entering the Canadian market, but the company recently stated that it has no plans to do business in Canada. It is possible that the Vodafone deal took precedence over a possible expansion into Canada. Once the Vodafone transaction is complete, Verizon will enjoy more flexibility and options to manage growth in a lucrative mobile data market.
Verizon Wireless 4G LTE customers can surf the Web, post status updates and photos, and download files wirelessly at speeds up to 10 times faster than customers on 3G networks. However, the mobile data market is not only about cell phones anymore. The demand for other home devices that require wireless connections is growing. Devices like home security equipment, tablets, thermostats and refrigerators are now using wireless data. The growth of the 4G LTE network has led to new and innovative solutions as diverse as LTE-connected cars and remote medical diagnostic options. One solution recently brought to market is the Verizon 4G LTE Router, which can support wired and Wi-Fi-enabled devices simultaneously, allowing users to take it on vacation or business travel to stay connected.
Verizon's heavy investments in its network may soon pay off. In the past, Verizon was a victim of its own success, as increasing smartphone use caused strains to the network. The company now has the largest network in the U.S., and introduced new plans to provide users with more frequent smartphone upgrades to match rival offers from competitors T Mobile US Inc. (NYSE:TMUS) and AT&T Inc. (NYSE:T). T-Mobile shares have outperformed Verizon over the past year, as T-Mobile's stock is up over 20%, while VZ shares are up only fractionally.
Verizon shares are trading very close to long-term support. If the stock tests support and remains over support, as defined in our real time trading report, Stock Traders Daily expects higher levels and a test of resistance. That would make VZ a buy at support, with risk controls defined by support as well. Treat support as inflection though, and should the stock break below support, sell signals would surface.