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VZ Tumbles Premarket: Morningstar Targets 23% Gain
Morningstar Says Verizon Stock Is a Bargain: What You Need to Know
The Big Picture
Imagine you’re at a store and see a high-quality item on sale for way less than it’s worth. That’s basically what Morningstar—a company that researches stocks—is saying about Verizon (VZ) right now.
Even though the stock dipped slightly on Monday morning, the research firm believes Verizon shares are significantly undervalued and could jump more than 23% from current levels.
Key Takeaways at a Glance
IMPORTANT POINTS
- Fair Value Estimate: $54 per share (≈23% upside from recent price)
- Economic Moat Rating: "Narrow" – Verizon has some competitive advantages, but they’re not unbreakable
- Uncertainty: "Medium" – There are real risks, but not extreme ones
- Dividend: Strong yield, funded by less than 60% of free cash flow (very safe)
- 2026 Performance: Stock already up 14%+ this year
Why Morningstar Likes Verizon
1. It’s the Biggest Kid on the Playground
- 94 million postpaid (monthly bill) phone customers
- 20 million prepaid (pay-as-you-go) phone customers
- ~35% market share of U.S. postpaid phones
- That’s 10% more customers than T-Mobile and 25% more than AT&T
2. Size = Profit Power
- Being #1 lets Verizon spread its massive network costs over more customers
- Result: Highest profit margins and best returns on capital in the wireless industry
- Wireless makes up 75% of service revenue and almost all operating income
3. Fiber Expansion Via Frontier Purchase
- Buying Frontier Communications gave Verizon more fiber-optic cables (super-fast internet lines)
- This helps them bundle home internet + wireless – a sticky combo customers love
4. Revenue Growth Coming Back
| Time Period | Wireless Service Revenue Growth |
|---|---|
| 2026 | Flat (0%) |
| 2027–2031 | ~2% per year |
| 2028 specifically | Accelerates to ~3% |
Why the pickup? Customers moving to newer, pricier plans.
5. Dividend Lovers, Rejoice
- "Fantastic dividend yield" (Morningstar’s words)
- Payout uses <60% of free cash flow = plenty of safety margin
- Translation: The dividend isn’t going anywhere
The "But Wait…" Section: Risks to Watch
RISK FACTORS
- Regulatory risk – Government rules could change
- Spectrum auctions – Buying airwaves for 5G/6G is expensive
- Tech disruption – New tech could help rivals catch up
- Satellite competition – Companies like SpaceX (Starlink) could challenge ground networks
- Traditional rivals – AT&T, T-Mobile, Comcast, Charter all gunning for share
What Regular Investors (Retail) Think
On Stocktwits (a social platform for traders), sentiment is "Bullish" with high chatter volume.
User "MoFX": "$VZ looks like there is still more upside room."
User "Tdorsey1776": "Talk to any network engineer, the fiber network will not be threatened by Sats..its physics, in fact its never been more valuable."
Recent Price Action
- Friday: Stock jumped nearly 6%
- Monday premarket: Dipped 0.37% (tiny pullback after big jump)
- Year-to-date 2026: Up 14%+
Summary
Morningstar thinks Verizon is a high-quality company trading at a discount. Here’s the simple version:
| The Good | The Risks |
|---|---|
| #1 U.S. wireless carrier | Regulation & spectrum costs |
| Best margins in the industry | Satellite & cable competition |
| Growing fiber + wireless bundles | Tech disruption |
| Safe, juicy dividend | Medium uncertainty |
| Stock priced below fair value ($54) | Flat 2026 revenue |
Bottom line: If you want a steady dividend payer with market-leading scale and potential 23% upside, Verizon warrants a closer look. Just know the competitive battlefield is heating up.
FAQ
1. What does "Narrow Economic Moat" mean in plain English?
Think of a castle with a moat. A "wide moat" = nearly impossible for competitors to cross (like Google in search). A "narrow moat" = Verizon has advantages (scale, network), but determined rivals can chip away over time.
2. Is the 23% upside guaranteed?
No. It’s an analyst’s estimate of fair value. Stocks can stay cheap (or get cheaper) for a long time. Always do your own research.
3. Why is the dividend "safe" if it yields so much?
High yield can be a red flag. But here, Verizon pays less than 60% of its free cash flow as dividends. That means even if profits dip, they have a big buffer before they’d need to cut the payout.
4. Can satellite internet (Starlink) really replace fiber/cable?
Most network engineers say no for dense areas. Physics favors fiber for speed/latency/capacity in cities. Satellites shine in rural/remote spots. Verizon’s new fiber assets actually benefit from this dynamic.
5. Should I buy VZ stock today?
This article is information, not advice. Consider:
- Your income needs (dividend)
- Risk tolerance (medium uncertainty)
- Time horizon (growth picks up post-2026)
- Portfolio diversification
Consult a financial advisor before investing.
