Why Verizon's $20bln Splurge is An "Atrocious Idea", according to analysts...

Well friends, today we are back at it after a much needed weekend. Yet, while every investor today seems to be coming off some PTSD after last week's horrific showing (thanks, Labor Market reports, and non-farm payrolls) - Verizon is doing what it does best: trying to keep up with T-Mobile by opening up it’s warchest piggy bank and splurging $20 billion big ones on acquiring Frontier Communications.

(Source: CNN) 

The reason? Well, to join the telecom monopoly game of course. For those not in the know, Verizon's a tad bit late to the party and now they’re trying to keep up with the Joneses. For instance, Verizon competitors such as AT&T have already linked up with Wall Street Bet’s favorite space stock - AST SpaceMobile in order for $ASTS to provide a space based cellular broadband to AT&T customers…

(Source: AT&T) 

While T-Mobile on the other hand is getting its Elon on as they’ve recently come to a strategic agreement with SpaceX (starlink) to officially cover every friggin area under the sun through space. 

Montana peeps right now: 

(Source: Giphy) 

So naturally, Verizon has been feeling left out, and apparently Frontier Communications (with a whopping fiber optic network of 5.2 million locations) is the QB1 play. 

In short, last week, Verizon sent a $38.50-per-share love letter to Frontier, which comes with a 37.3% premium over its closing price on September 3, 2024. Again, this deal is Verizon’s desperate attempt to wrap its arms around the fiber network market, a place that’s been sidelined for Verizon as they’ve been too busy trying to make their 5G dreams come true. Spoiler alert: Verizon's 5G is like cheese… full of holes. 

(Source: Giphy) 

Of course, Verizon's CEO, Hans Vestberg, came out of the woodworks, full of optimism on this deal as he claimed the acquisitions is a “strategic fit” - or in layman's terms, “This is just the kind of deal for me to keep my job”. The goal obviously is to prop Verizon as the heavyweight champ in the fiber ring, while giving it a nice juicy arsenal to compete with rivals like AT&T who have nearly 28 million fiber locations. 

(Source: Giphy) 

Meaning, with this new purchase on the books, Verizon will now integrate Frontier's 2.2 million fiber customers into its existing 7.4 million Fios connections—creating a combined network of about 10 million fiber consumers across 31 states.

However, with that said, the funny thing about this is, this isn’t the first time  Verizon and Frontier have tangoed. For example they were once in a relationship where Verizon sold its TV and internet business to Frontier for $10.54 billion back in 2016. Now, Verizon is bringing those assets back into the fold at nearly double the price while Frontier just gave corporate America a full on clinic on “How to Claw Out of a Chapter 11 Bankruptcy”. (Take notes, Big Lots).

(Source: Giphy) 

But, but, but…

While the opportunity looks promising for Verizon, (especially for Frontier who skyrocketed nearly 40% on the news), not everyone is singing praises for this acquisition. Craig Moffett, an analyst who seems to have a knack for raining on corporate parades, described it as “an absolutely atrocious idea.” He argues that even with Frontier’s assets, Verizon’s fiber footprint would still cover only a tiny fraction of the U.S., making it as competitive as a tortoise in a hare race. 

(Source: Invezz) 

On the other hand, TD Cowen analyst Gregory Williams sees this as Verizon playing the ultimate game of catch-up, (my thoughts exactly). Williams points out that while AT&T was busy dropping the word “convergence” like it was hot on its Q2 earnings call, Verizon was out here making headlines for a whole different reason: trying to keep up.

(Source: Seeking Alpha) 

And let’s not overlook Verizon’s stock performance, which has been about as thrilling as watching paint dry. Despite a year-to-date increase of +7.97%, last week it dipped -0.31%. Meaning, when it comes to investors, the upside looks better for Frontier than it does Verizon. 

(Source: Channel Futures) 

But again, despite the skepticism, Verizon obviously believes this deal will be a boon for revenue and adjusted EBITDA growth rates. They’re projecting at least $500 million in annual run-rate cost synergies within three years of closing. That’s corporate jargon for “we’re going to find a way to save money, even if it means cutting the free coffee.” 

(Source: Giphy) 

So clearly, as we can all see, there’s a bit of a “four green houses and one red hotel” feeling going on in the telecom industry, or a “choose your weapon” vibe for all you nerds reading this. 

(Source: Makeameme)

But even with the hype, only time will tell if this actually adds immense value to Verizon's bottom line to justify the $20 billion price tag. However, with that said…

Right now, I could give a rats a$$ whether or not Verizon comes out on top of this or not. Why? Well to put it simply, our Stocks.News premium members just finished last week with our FIFTH… yes, fifth - triple digit winner in a row. How much of a triple digit, you ask? Try a thicc and juicy 162% banger in less than 24 hours!

(Source: Giphy) 

Meaning, why stress your brain cells on Verizon's “trying to keep up” acquisition when the last FIVE of our Stocks.News alerts all exploded to peak moves of +110%, +185%, +110.10%, 162% and +300%... in LESS than 48 hours?! 

In short, our premium members have absolutely been eating the past few weeks, and with the anxiety of rate cuts looming in on September 17th, our next alert is set to be even more explosive. 

(Source: Giphy) 

Could it be another +100% or +300% move in the making? There’s only one way to find out. Meaning, if you’re not a premium member, then what the heck are you doing? Hurry and upgrade immediately to make sure you get in on the action!

In the meantime… stay safe and stay frosty, friends! Until next time…

Stocks.News holds positions in Verizon and AT&T as mentioned in the article.