DVD@deepvaluedude
$ASTS $VZ
Verizon Investment Thesis
🧵(1/x)
Rating: Buy
Current Price: $49
2 year PT: ~$72
I. Executive Summary
Verizon is at a genuine strategic inflection point. Under new CEO Dan Schulman (appointed October 2025), the company has initiated a comprehensive operational overhaul, cutting 13,000 positions, abandoning unprofitable price-increase-driven growth, and completing the transformative $20 billion all-cash acquisition of Frontier Communications on January 20, 2026. The stock has responded favorably, rising from a 52-week low of $38.39 to approximately $49 today, but I believe the market has not yet fully priced in the medium-term earnings power and free cash flow generation potential of the combined entity.
The thesis rests on five pillars:
1. Frontier Integration Unlocks Convergence Value: Verizon now passes ~30 million fiber premises across 31 states, enabling a nationwide convergence strategy (mobile + home internet bundles) that reduces churn by ~50% for converged customers. Run-rate cost synergies have been doubled to $1B+ by 2028.
2. Subscriber Momentum is Inflecting: Q4 2025 delivered 616,000 postpaid phone net adds, highest since 2019, and management is guiding 750K–1M for FY2026, a 2–3x acceleration.
3. AST SpaceMobile Satellite Partnership, Under-Appreciated Upside: The definitive commercial agreement with AST SpaceMobile to provide direct-to-cellular broadband via satellite fills coverage gaps, with cumulative partnership value of $3.0–$11.4B through 2030 via churn reduction (3–9 bps), combined tower savings of $590M–$2.2B (new build avoidance plus existing lease decommissioning), and D2D revenue share ($300M–$1.05B). Verizon’s asset-light model (zero owned towers post-Vertical Bridge sale) uniquely enables rural site rationalization.
4. FCF Machine with Capital Return Inflection: FY2026E FCF of $21.5B+ (7% growth) enables a new $25B share repurchase authorization alongside a 5.8% dividend yield and continued deleveraging.
5. Valuation Remains Undemanding + Macro Tailwind: At 10.0x forward P/E and a ~5.8% dividend yield, the stock is priced for stagnation. Under our rate scenario (Fed funds to 2.0–2.5% by 2028), WACC compression, yield-spread normalization, and P/E expansion create a path to $62–$72 per share (24-month total return of 39–59%). This is among the most asymmetric risk/reward profiles in large-cap equities.
