Is High-Yield Verizon a Stock a Buy Despite SpaceX Worries?

Verizon Communications (VZ +2.71%) once again demonstrated that its customer-focused strategy shift is working by reporting its Q3 results. However, investors remain wary of the wireless space, as Space Exploration Technologies (SPCX -4.33%) appears poised to enter the market.

With Verizon showing strong momentum but its stock down because of this potential threat, now could be a great time to buy this top telecom stock.

Image source: The Motley Fool.

SpaceX in focus

Verizon CEO Dan Schulman didn’t try to dismiss SpaceX’s efforts to enter the U.S. mobile market, instead saying he is going in under the assumption that the company will do everything it says it will and execute flawlessly.

However, Schulman said there are no shortcuts in building out a terrestrial network and that they will need 65,000 to 80,000 macro sites, backhaul, a combination of fiber and satellite, RAN (radio access network), and a whole lot of spectrum. He said this should take four to six years to fully build out and cost between $300 billion and $500 billion. Then SpaceX will need retail, customer service, and back-office systems. This will make SpaceX the sixth competitor in the marketplace.

Schulman added that Verizon has been winning in a competitive marketplace despite two competitors essentially offering free wireless services. He added that there are also no backdoor routes into an MVNO (mobile virtual network operator) agreement, and granting one to a satellite provider would provide no benefit.

Verizon’s strength in Q3 was evident in another robust quarter of subscriber additions. It added 406,000 net postpaid phone subscriptions in Q3, an 820% year-over-year increase and its best Q3 performance in five years. It also added 137,000 net account additions, its best quarterly performance in a decade. Broadband customers, meanwhile, increased by 314,000.

VZ – Verizon Communications

$44.85+$1.19 (+2.71%)

NYSE · As of 10:00 AM ET 10/30/26

Even as its acquisitions rose, its acquisition cost fell 41% year over year, while retention costs declined by 30%. Postpaid churn, meanwhile, improved by 4 basis points to 94 basis points, and consumer postpaid churn fell 4 basis points to 87 basis points.

Overall revenue rose 1.5% year over year to $34.3 billion, but this was offset by a 9% decline in equipment revenue, as the company reduced spending on device subsidies. Service revenue climbed 3.5% to $29.2 billion.

Consumer revenue edged up by 1.3% year over year to $26.4 billion, with service revenue up 3.6%. The company’s business unit was solid, with revenue climbing by 2.6% year over year to $7 billion. Overall adjusted earnings per share (EPS) jumped 8.3% to $1.31, while earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed 8% to $13.8 billion.

Looking ahead, Verizon raised its outlook for postpaid phone subscribers, now expecting to end the year with between 1.1 million and 1.2 million additions. It also raised its adjusted EPS growth to 7% to 7.5%, up from a prior outlook of 6% to 7%.

Verizon also expanded its partnership with Amazon, signing a $2 billion infrastructure deal to provide AWS data centers with high-capacity fiber-optic connectivity. This followed a $1 billion agreement with Alphabet earlier this year.

Time to buy the stock?

Verizon is really hitting on all cylinders, adding new customers at a robust clip and signing its second large data center deal with a cloud computing company. Its customer-centric strategy is paying off, and it continues to have a big bundling opportunity following its acquisition of fiber-rich Frontier Communications.

VZ PE Ratio (Forward 1y) data by YCharts

With an over 6.5% dividend yield, an 11% free cash flow yield, and an 8-times forward P/E, Verizon stock has a nice secured payout, and the stock is cheap. While SpaceX potentially entering the market could remain an overhang, Verizon remains a top dividend stock to buy now on this recent pressure.

Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.