Verizon's Stock Is Still A Strong Buy

| About: Verizon Communications (VZ)
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Verizon Communications (NYSE:VZ) is currently the largest provider of mobile telecommunication services in the United States. Next to Verizon in market share is AT&T (NYSE:T) and both telecoms companies control more than 61% of the entire wireless telecommunication market in the U.S. In its attempt to fight the competition, Verizon Communications invested over $80 billion on evolving wireless technologies since 2000 when the company founded Verizon Wireless in partnership with Vodafone (NASDAQ:VOD). As at today, Verizon remains a telecoms leader to beat in customer loyalty and network reliability. The company is a cash cow and it generates huge revenues monthly from a large pool of its subscribers that are on postpaid contracts.

Verizon's Stock Performance

In the last five years, Verizon's stock has returned about 57.69% in price gain to its shareholders and that is quite decent.

Verizon Communications 3 Year Price Returns: 57.69% for Nov. 4, 2013

At the current price of about $51.08 per share (as of this writing on November 4th, 2013), Verizon stock has inched up by about 14.73% from a year ago. Also, between October 17 when the company declared its third quarter results and now, Verizon has returned about 9% in price gain to investors. I believe that the momentum in the stock price of this telecom company will continue on the upside from quarter to quarter into the foreseeable future as long as the company continues to exceed investors' and analysts' expectations.

Verizon Stock Inched Up by 14.73%

Verizon Continues to Exceed Investors' and Analysts' Expectations

According to its third quarter results declared on October 17, Verizon's operating income rose by 30% to $7.1 billion up from $5.5 billion it reported in the corresponding period of last year. This stellar Q3 performance represents a double digit income and revenue increase recorded by the company for the last four quarters in a row. An increase of 23.5% in operating margin was also reported by the company. The increase in operating margin shows the level of improvement in the company's sales margin and the level of prudence the management has applied in handling running costs and overhead expenses.

Verizon's third quarter earnings came in at $0.77 per share against analysts' expectations of $0.74. Also, the company reported 4% year-over-year increase in revenue of $30.28 billion for the quarter as against $30.16 billion being expected by Wall Street analysts. The company's net income for the quarter was $2.23 billion as against $1.59 billion it reported for third quarter of 2012.

Favorable ratings and recommendations continued to pour in for Verizon since its 2013 Q3 results were released to the investing public. A few of the favorable ratings from Wall Street analysts include ratings issued by the TheStreet, Deutsche Bank, Citigroup, Robert W. Baird, Oppenheimer, and Canaccord Genuity. Analysts at TheStreet reiterated a buy recommendation for Verizon. Deutsche Bank upgraded the stock from hold to buy with a price target of a maximum of $56. Stock analysts at Oppenheimer placed outperform rating on Verizon with a price target of $56.

Increased Market Penetration and Dominance

One of the factors that influenced price gain for Verizon's stock after the release of its 2013 Q3 financials was the announcement that the company gained additional 1.1 million net retail wireless subscribers during the third quarter. A whopping 927,000 connections out of the 1.1 million were postpaid subscribers, meaning that the company will rake in additional huge cash on a monthly basis to improve its revenue for subsequent quarter results. With the increase in connections recorded during third quarter, Verizon's total subscriber-base has now risen to 101.2 million. Out of this total number of connections, over 95.2% are postpaid customers. It appears that more and more wireless subscribers are beginning to hook up with Verizon's network to enjoy the superior network quality the company offers. I think Verizon's subscriber growth rate isn't going to slow down anytime soon as long as the company keeps improving its systems with evolving wireless technologies.

Verizon's Outlook and Valuation Metrics

Verizon has inherent factors that could drive its earnings growth in the coming quarters. One of these factors is the successful deployment of its reliable super-fast 4G LTE (Long-Term Evolution) technologies to cover about 99% of its existing 3G network. What Verizon's broad network coverage means is that the more the number of smartphone and tablet launched into the United States' telecoms market, the more Verizon's revenue will grow since the company's 4G LTE infrastructure network now covers about 95% of the entire population of the U.S. In addition, Verizon has been exploring other sources of revenue like its FiOS Fiber Optics TV/Internet bundle package targeted at the lucrative pay TV market. Sales from this segment will gradually become significant as the company operates from quarter to quarter. Verizon's stock still remains a strong buy now!

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.