In the near term, I believe technical indicators suggest Verizon's (VZ) stock price will go down slightly. However, I also believe in the long run, Verizon is well positioned in an important market, which will lead to sustainability and an increase in its value.
With a stock price above $41 per share, Verizon stock is near its 52-week high. While this is good for people currently invested in Verizon, it is not as good for potential investors. I expect the Verizon stock to peak soon, and then drop back down just slightly. I say this because Verizon's stock price has been increasing steadily since early April. Since Verizon is not a high-growth company like competitors Google (GOOG) or Apple (AAPL), I expect Verizon stock to self-adjust, with the growth eventually coming to a peak, and either stay at a $40 range plateau or decrease for a period of time.
Verizon is currently looking to reduce its workforce by about 1 percent, or 1,700 jobs. While this in itself is not good, and could hurt the stock price, the reasoning and handling of the potential cuts is hugely important. First off, Verizon is offering a voluntary buyout to technicians and call-center employees. This is a sign of a well-run company that truly cares about its employees and wants to make their transitions to and from the company a success. A voluntary buyout will certainly create less negative press than an outright cut of 1,700 employees would.
A second important piece of information to note is that the reduction in workforce is due to a "workforce surplus," as opposed to a cost cutting measure. A cost cutting measure would suggest the company is enduring a period of low revenues or increasing costs, either of which are bad signs for Verizon stock. However, a surplus in the workforce does not suggest either of these problems.
The exploding demographic of Hispanics in the United States has created an opportunity that Verizon has successfully capitalized on. Privately held Univision Communications, the leading server in entertainment media for Hispanic America, has announced a new multi-year carriage agreement between Verizon FiOS TV and Univision. This agreement will continue the broadcast of many of Univision's stations on FiOS, and it includes new broadcast stations as well - all directed towards America's Hispanic population.
Along with the new agreement with Univision, Verizon FiOS TV has announced it will launch ten new Spanish-language channels - making it the United States' leading television provider of such channels. Olympusat, another leading provider similar to Univision, provides nine of the ten new channels to be broadcast by Verizon. Even though a price hike for FiOS TV is accompanying these agreements, they will almost undoubtedly bring in more revenue for Verizon, which will lead to more value for investors.
Another reason I believe Verizon is headed for future success is the particular market it competes in. The mobile communications and technology market is destined to be an important part of society for years to come. Innovative companies like Google, Apple, and Samsung are bringing enough new products to the market to keep consumers interested and willing to spend on both the products and the service, which happens to be provided by companies like Verizon, Sprint Nextel (S), and AT&T (T).
Verizon Wireless has announced the release of new Android 4.0 software for its Motorola Xoom tablet. This software will include new features for the tablet that involve past design and ease-of-use issues. This software update is just an example of innovations that continue to improve products that lead to an increase of value for Verizon Wireless stock.
The Android-powered Samsung Galaxy S3 smart phone will launch in the US later this month with the carriers Verizon, Sprint, and AT&T, among others. This particular smart phone is expected to set a new standard in mobile devices, as it will move its focus from just content consumption to content sharing - something unheard of for mobile devices. The popularity and strong demand for this product in Europe is a good sign for what is to come for this product, and its carriers. With the soon-coming arrival of what may be the most advanced smart phone to date, there is little doubt that all the carriers, not just Verizon, will see a boost in sales and revenues from the launch of this device.
Of course, the phone represents a big step in the smartphone war, especially in the battle between Google and Apple. Google's Android line has been searching for a big name, since its sales are spread across such a variety of phones. This could help it bring some competitive drive to the battle against Apple's iPhone. The war I speak of, and the furthering of it, only helps smartphone vendors like Verizon out, as demand continues on and the battle is not for price, but for technological advancement in the operating systems.
Looking at Verizon's main competition, AT&T also appears to be in a good position for sustainability and growth. It has recently signed a contract expansion for 7,000 of its core wireline workers. This is a good sign because if shows management's willingness to negotiate with its workers for the betterment of the company. It also suggests AT&T does not currently have any cost or revenue problems forcing them to make drastic changes. AT&T's stock price and dividend are also very similar to Verizon's, and I believe they will also benefit from a growing market and new innovations.
I believe Verizon has set itself in a great market that will continue to grow alongside mobile device technology. It has good market share, a limited number of successful competitors and what appears to be a promising future. While I do believe a short-term fall in stock price will occur, I think Verizon is an overall good investment opportunity for the long term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.