New York City-based Verizon Communications Inc. (VZ - Get Rating) is the largest wireless service provider in the United States. It also provides landline services to Northeast households and corporate services abroad. It possesses the most spectrum in the sub-6 gigahertz range, where 5G will be implemented first, and it is the leader in the millimeter-wave spectrum.

However, the stock is down 20% in price over the past year and 11% year-to-date, closing yesterday’s trading session at $46.23. In addition, the stock is currently trading 22.8% below its 52-week high of $59.85. 

VZ’s shares dipped in price as the telecommunications giant published first-quarter profits and cut its forecast for 2022.

Here is what could shape VZ’s performance in the near term:

Increasing Competition

While VZ was able to offset most of its customer losses due to its commercial operations, AT&T (T - Get Rating) has been charging ahead, adding 965,000 postpaid customers, and T-Mobile (TMUS) exceeded projections. AT&T had been quite aggressive in acquiring sub-6 GHz spectrum licenses earlier and currently has almost as many as Verizon. AT&T and T-Mobile will be allowed to immediately install the 3.45 GHz spectrum they acquired at auction last year; Verizon withdrew from the bidding early.

Mixed Financials

VZ’s total revenue increased 2.1% year-over-year to $33.6 billion for the first quarter. Its total wireless service revenue growth was 9.5%. However, its services and other revenue were down 2.5%. The company’s cash flow from operating activities declined 29.9% from its year-ago value to $6.8 billion. In addition, its unsecured debt increased by $614 million sequentially to $137.3 billion.

Mixed Valuation

In terms of forward non-GAAP PEG, VZ is currently trading at 2.16x, which is 61.7% higher than the 1.34x industry average. Also, its 2.75x forward EV/Sales is 30.9% higher than the 2.10x industry average.

However, VZ’s 8.54x non-GAAP forward P/E is 51.1% lower than the 17.46x industry average, and its forward EV/EBIT is 22.8% lower than the 15.07x industry average.

POWR Ratings Reflect Uncertainty

VZ has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. VZ has a C grade for Quality and Value. The company’s mixed financials are consistent with the Quality grades. In addition, the stock’s mixed valuation is in sync with the Value grade.

Among the 20 stocks in the F-rated Telecom – Domestic industry, VZ is ranked #5.

Beyond what I have stated above, you can view VZ ratings for Growth, Momentum, Stability, and Sentiment here.

Bottom Line

VZ revised its previous forecast for service and other revenue, which is now projected to be approximately flat compared to 2021. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $52.35 and $53.17, respectively, indicating bearish sentiment. Furthermore, analysts expect its EPS to decline 1.5% in the current quarter (ending June 30, 2022) and 2.1% next quarter (ending Sept. 30, 2022). Therefore, we believe investors should wait before scooping its shares.

How Does Verizon Communication Inc. (VZ) Stack Up Against its Peers?

While VZ has an overall C rating, one might want to consider its industry peers, Interdigital Inc. (IDCC - Get Rating), which has an overall A (Strong Buy) rating, and Ooma Inc. (OOMA - Get Rating), and AT&T Inc. (T - Get Rating), which have an overall B (Buy) rating.

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year

Top 10 Stocks for 2022

Bear Market Scare? Read Before Your Next Trade

7 SEVERELY Undervalued Stocks