VZ (Verizon Communications)
- BUY VZ stock
Thesis
Buy Verizon after the SpaceX spectrum selloff. I think the drop priced in a competitive threat that is years away and limited in size.
- The selloff. SpaceX agreed on October 8 to buy Grain Management's nationwide 800 MHz licenses for a reported $8 billion. VZ closed at $41.65 on October 9, down 10.14% on 88.6 million shares. That was its worst day since 2002. The stock is now $42.94.
- Why the threat is limited. SpaceX describes the deal as up to 14 MHz of paired spectrum. That is a thin layer for carrying a national phone customer base. The deal still needs FCC approval. Light Reading reports that analysts say SpaceX also needs a wholesale deal to use an existing carrier's network. T-Mobile CTO John Saw pointed to satellite limits on indoor coverage, signal strength and capacity.
- The business is improving. Verizon raised full-year guidance after both Q1 and Q2 2026. It added 184,000 postpaid phones in Q2. Mobility and broadband service revenue grew 2.8% in Q2, and the company expects about 4.0% growth in Q4.
- The dividend. The quarterly payout is $0.7075, about a 6.6% yield at today's price. Reported quarterly free cash flow of $6.4 billion covers it. Part of the October 9 drop was the stock going ex-dividend that day.
- Why stock and not options. IV rank is 75 and IV percentile is 90, so options are expensive. Stock collects the yield while the market reprices the threat. Beta is 0.28 and the liquidity rating is 4.
Risks
- Main risk. Starlink Mobile could become a real fourth national carrier and force price cuts across the industry. Morningstar raised its uncertainty rating on Verizon, T-Mobile and AT&T to High from Medium. The SpaceX overhang has weighed on VZ since the June SpaceX IPO.
- Earnings. Q3 results come before the open on October 26. Any rise in customer losses or softer guidance would hit the stock.
- Debt. Verizon carries about $172 billion of debt. That limits its room if competition forces higher spending.
- Overlap. The channel already has open bullish calls on T and TMUS. This adds more exposure to the same telecom risk.