Can you buy Shares of Verizon Now?

By: Dennis Biray
Submitted: 2007-01-17 16:17:34
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Approximately one week away from Verizon’s (VZ) third quarter results, many investors are speculating whether to purchase shares of this lucrative telecommunications giant. In search for answers by examining earnings from other powerful monsters, there is a mix bag in terms of what to expect for both Verizon and the telecommunication industry in general. However, just specifically in the case of Verizon, I believe the real question should not be placed into whether Verizon accumulates high margins when two years are compared with one another or if this company beats its EPS estimate by a few cents, but how will Verizon perform in the next few years.

More than likely, with the giant status of Verizon, regardless of any significant changes from analyst expectations, Verizon shares should remain fairly steady when earnings for this company are reported in about one week time frame. You may say that anything is possible in this rational expectations market, but if you look at the technical side of this company over the past three years, you, as an investor would realize the sideways motion Verizon embodies. Fluctuating in the 30 to 40 point range for almost three years, Verizon looks very similar to other large cap giants such as Microsoft, reporting very little disturbances if at all in terms of share prices regardless of how earnings play out. While some investors may argue that such a stock represents a steady but guaranteed way of accumulating capital gains in the future, such a sentiment does not hold perfectly true with Verizon. Since its opening days about 25 years ago, Verizon has only grown 300% during that time period where much of that gain can be attributed to the overbought period of the late 1990s for the technology sector. While 300% may sound pretty lucrative to many investors, there are many other both well-established but relatively new companies on the market such as Google or Goldman Sachs which not only has the potential to reach 300% in 25 years but more than likely triple or quadruple that amount in possibly less than ten years. Thus, while you are pretty assured that Verizon will not decrease in terms of share price, even during a time of recession, to astounding levels, for the long term when looking at technical analysis I do not see much trend assurance for heavy optimism.

Nevertheless, I have only looked at one indicator in determining my rational for the purchase of Verizon shares. As an efficient investor, other indicators like fundamentals should be utilized as well. In the case for numbers when looking at Verizon, an almost parallel structure exists to how margins are represented juxtaposed to technical trends. It is true that Verizon has posted modestly higher gains year after year in most of the major categories, but the same can be said about how Verizon has moved in terms of share price during the same duration. While economic changes and consumer preferences, not to mention innovated telecommunication products, can challenge such momentum, for the time being, especially since Verizon is near a 52 week high, there should be no strong desire to purchase more or any shares as any falter in the economy or earnings will send Verizon back down a few points. Therefore, as prestigious as Verizon is in terms of branding and name recognition, just like my views on Microsoft, I do not see much encouragement or heavy optimism by purchasing shares from this company in both the short term as well as the long term.

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