Last week Exxon Mobil (NYSE:XOM) was replaced by Verizon Communications Inc. (NYSE:VZ) as the worst performing Dow Jones stock in 2017. Last week the stock went down by 0.2% and on a year to date basis Verizon has lost about 8.84%, pushing the stock to the bottom of the list.
The United States wireless carriers are in a heated race to offer unlimited data to their consumers, however the competition may take a toll on their revenues. Investors are keeping a close eye on how big of a hit will Verizon’s revenue take as the company continues to invest in data plans. The interesting point is that Verizon (NYSE:VZ) is still one of the best Dow stock in terms of dividend yields; the company has a 4.75% yield.
The wireless carrier is busy assimilating its Yahoo acquisition. Wall Streeters will be closely watching the Verizon’s (NYSE:VZ) transition into a media empire. The transition, if successful, could help the company increase its revenue and make up for the losses it is facing in its efforts to capture a larger share of the wireless market share. But investors may have to wait a little more to see the results of Yahoo’s integration into Verizon’s wireless business.
Despite its performance, analysts see sufficient growth potential in Verizon as a media company. One of the highly upcoming anticipated services is its Pay TV Service. Verizon (NYSE:VZ) is looking to replace its current TV services with an app for cable replacement. However, once again it brings us back to the amount of money this project will require, straining revenues even more. Its current TV services FiOS and Go90 are already affecting the company’s cash flow.
However this optimism is not without caution. Verizon (NYSE:VZ) certainly has a few major competitors to deal with; these include the mighty Alphabet’s (NASDAQ:GOOGL) YouTube and Hulu. In order to make space in this relatively saturated market, Verizon will have to carefully orchestrate its media strategy.
Currently one of the best and most trending ways to deal with market saturation is to produce original content, but once again it is an extremely expensive business, which means more investments and lower short term profits. Moreover Verizon (NYSE:VZ) in the original content market has extremely strong competitors, including Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN). The market is expected to get even tougher with Apple’s (NASDAQ:AAPL) expected entrance into the field.
Verizon (NYSE:VZ) has the cash to transition if this is required. But it may be difficult to not only get new pay TV subscribers, but also convert its existing customer pool from wireless services users to TV customers. One way to get pay TV subscribers is to acquire one of its competitors; however that will require billions and currently there may be no sellers in the market.
Verizon has some work to do for sure; the company failed to meet analysts’ earnings estimates for the fourth quarter of 2016. Revenue of $532 million generated by the digital media unit of the company was also down by 5% on a YoY basis. This is certainly not the figure investors, who already are concerned about the major investments would have wanted to see, but it is still early to pronounce judgment.
Therefore, Verizon (NYSE:VZ) may be moving in the right direction; but the billion dollar questions is will the company be able to execute its plans to get maximum benefit?
Verizon (NYSE:VZ) currently has a market cap of $199.48 billion. The stock’s 52-week range is between $46.01 and $56.95.