06.30.2010
Market Report: A Stock Review of the Telecom Giants
Investor Education Series: Volume I. Issue 2
Original article written by Net Advisor™
Verizon Communications Inc.
If we look at their numbers beyond the stock prices there are about as ugly as can be.
[wikichart align=”right” ticker=”NYSE:VZ” showannotations=”true” livequote=”true” startdate=”07-04-2010″ enddate=”07-10-2010″ width=”300″ height=”245″] (NYSE: VZ)
Net Income:
Verizon’s net income is lower than it was in 2007.
2009 $3.651 billion
2008 $6.428 billion
2007 $5.521 billion
Cash Flow:
Verizon’s cash flow in running in the big negatives.
2009 ($7.773 billion) – negative
2008 $8.629 billion – positive
2007 ($2.066 billion) – negative
Balance Sheet:
Verizon’s Net Tangible Assets has increased to the negative by 500% since 2007, or almost 100% since 2009.
2009 ($59.697 billion) – negative
2008 ($31.502 billion) – negative
2007 ($10.448 billion) – negative
Net Institutional Purchases & Sales:
In the last quarter, Net Institutional Purchases has shown a 3.05% decrease, net sell of 47.7 million shares, that suggest institutions have been existing, not buying the stock.
Price Earnings Ratio:
(What is a PE ratio?) Verizon’s current PE is 33.35. Based on the company’s PE ratio, the stock cut be cut in 1/2 and it still be slightly overvalued relative to its peers.
AT&T PE 12.14
Quest Comm. PE 18.54
Verizon PE 33.35
Verizon’s Bottom Line:
The current high dividend running at the time of this article was $1.90 or 6.60% a year, and in my view the dividend at this rate is unsustainable.
AT&T, Inc. (NYSE: T)
Net Income:
AT&T’s Net Income pretty stable over the last 3 years.
2009 $12.535 billion
2008 $12.867 billion
2007 $11.951 billion
[wikichart align=”right” ticker=”NYSE:T” showannotations=”true” livequote=”true” startdate=”07-04-2010″ enddate=”07-10-2010″ width=”300″ height=”245″]
Cash Flow:
AT&T’s cash flow went positive first time since at least 2007.
2009 $2.010 billion – positive
2008 ($178 million) – negative
2007 ($448 million) – negative
Balance Sheet:
AT&T’s Net Tangible Assets negative, but improved in 2009 versus 2008.
2009 ($33.182 billion) – negative
2008 ($39.194 billion) – negative
2007 ($13.748 billion) – negative
Net Institutional Purchases & Sales:
In the last quarter, Net Institutional Purchases has shown a 3.88% increase, net buy of 141.3 million shares, that suggest institutions have been buying, and perhaps trading out of VZ into T.
AT&T Bottom Line:
The current high dividend running at the time of this article was $1.68 or 7.00% a year, and in my view the dividend at this rate is fairly sustainable based on FY 2009 financial numbers.
Verizon vs. AT&T
From a technical analisys point of view, As of 06-30-2010 both VZ and T are trading just below their 200 day moving average, generally a bearish sign.
If I had to pick one as an investor right now, I’d pick AT&T. If I had to be a subscriber of one, I’d pick Verizon due to a broader cell phone coverage. VZ is also expected to get the iphone in 2011 which should help their business from a revenue increase point of view.
“Verizon Wireless, the largest U.S. mobile-phone company, will start selling Apple Inc.’s iPhone next year, ending AT&T Inc.’s exclusive hold on the smartphone in the U.S., two people familiar with the plans said.”
— (Source: Bloomberg-Businessweek)
If however, Verizon cuts their dividend in the future AT&T should follow, as a dividend cut would be beneficial to both companies right now.
Please keep in mind that conditions can change; therefore author’s opinions may change at any time without notice. Please note general disclaimer.
(Data Source: Yahoo Finance)
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AT&T, and the AT&T logo are registered trademarks of AT&T Intellectual Property and or its respective companies.
Verizon, and the Verizon logo are registered trademarks of Verizon, Inc. and or its respective companies.
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© 2010 Copyright Net Advisor™ All Rights Reserved.
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