Verizon Communications' (VZ) new strategy is gaining momentum, with falling churn, positive account growth and organic wireless service revenue nearing break-even, but its relative performance will increasingly depend on delivering sustainable revenue, EBITDA and free cash flow growth in 2027 as benefits from the Frontier deal and initial cost reductions fade, UBS Securities said.
The investment firm said in a Monday note that Starlink remains the key long-term wireless debate, but noted management's view that building out the satellite network would take at least four to six years and cost $300 billion to $500 billion, leaving Starlink with a comparable cost structure in a six-player market.
Management reiterated there is no benefit to offering a satellite mobile virtual network operator service and no backdoors in existing agreements, according to the note.
UBS said Q3 financials were in line to slightly ahead, with phone net adds and account growth better but broadband adds softer.
Management now expects wireless and broadband service revenue growth in the upper half of its 2.5% to 3% guidance range and free cash flow growth of 12%, up from 9% to 10% previously, on better EBITDA and lower taxes and working capital.
The investment firm forecasts 1.5% wireless and broadband service revenue growth in 2027, up from 1.2% previously, with wireless improving and broadband slowing as the Frontier deal is lapped.
UBS has a neutral rating on the stock, with a price target of $48.
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