Views on Verizon

01/16/2004 12:00 am EST

Focus:

Gregory Spear

Editor and President, The Spear Report

"Barely a month ago, analysts and commentators were falling over themselves to proclaim the death of the traditional communications firms," says Roger Conrad. "But telecoms have proven again that buying into any negative media hype is a winning strategy." Gregory Spear agrees, and both advisors are bullish on the same play in the sector.

"Over the past month, Verizon (VZ NYSE) has lead a comeback in communications stocks, across the board," says Roger Conrad, editor of The Utility Forecaster, and co-editor of Personal Finance. "One reason: It's become increasingly obvious that size is not only essential to industry success, but assuming even minimally competent management it almost ensures it. Verizon announced a $3 billion build-out of its wireline and wireless broadband network in 2004, even as it continues to boost cash flow and reduce debt. That will enable it to offer 3G services on its wireless network and convert its traditional phone service base to VOIP, as demand for that service grows. It's clear that big telecom is far from dead and that the increasing concentration of power in this sector will continue. The stock remains a buy on dips to the mid-30s."

Adds Gregory Spear, editor of The Spear Report, "Verizon, the largest US phone company, is betting that the critical time has come to commit to next-generation (3G) broadband wireless. Its 3G network will be about DSL speed, i.e. fast enough to allow customers to download video and music as well as send still and video messages. The company expects this wireless Internet data network to be available in major US cities this summer. If Verizon can demonstrate that it can actually win this race, a 50% improvement in the stock price from here is quite possible. In our view, VZ appears to be well on its way to doing just that and we won't have to wait very long to find out who the winner actually is. We think all the bad telecom sector news is already priced into VZ's stock and this is an attractive place to make an intermediate to long-term investment that should be able to weather any future market storms."

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