Source: PaxForex Premium Analytics Portal, Fundamental Insight
At the end of 2020, the U.S. Federal Communications Commission auctioned off the rights to use radio frequency airwaves for 5G. The three largest cellular carriers, Verizon, AT&T, and T-Mobile, were among the bidders. They each got their own piece of the airwaves, but Verizon was the biggest winner. The company will pay $45.5 billion for its share of the rights.
5G, or fifth generation, builds on the 4G LTE capabilities, which increased speeds over previous generations and gave us video on our smartphones. With 5G, consumers will be able to access data at 10 times the speed of 4G LTE and with zero latency or buffering on all their devices.
As carriers develop their 5G networks, the service could be extended not only to smartphones, but also to home Internet and edge computing, which allow cloud computing. So far, however, Verizon's service has drawn mixed reactions. Bears and bulls are looking at different aspects of the company to form their opinions. Here's what they say.
Verizon is still in the early stages of building its 5G network. Today the service is available in densely populated U.S. cities. Verizon's goal in building the network is to attract new customers who want 5G service. However, 5G service comes at a higher price, and Verizon is not as active in attracting new customers.
Verizon lost 36,000 wireless customers on a net basis in Q1 of 2022. Q2 was slightly better, but the company added only 12,000 new wireless customers. While that figure includes all Verizon services other than 5G, it's not a good sign for the company, which is expected to ramp up its 5G business.
5G goes beyond just wireless service for smartphones. Customers can also get 5G fixed wireless broadband for the home with some of the fastest speeds and most reliable services. Customers in Verizon's still limited coverage area are taking advantage of these services en masse. Verizon connected 23,000 fixed wireless Internet customers in Q2 of 2021. As the company continued to build its network throughout the year, it added 256,000 fixed broadband subscribers in Q2 of this year.
This segment is still tiny compared to the size of Verizon's entire business, but there's still a long way to go before the service fills the entire coverage map. Before all is said and done, fixed broadband for home and business could be a significant contributor to the company.
Verizon also has some ambitions to bring 5G service to the edge computing market. Simply put, edge computing allows the cloud and data centers to work more efficiently. Given the tremendous growth of cloud computing, Verizon estimates that the market for edge computing and private edge networks is worth $30 billion. The company is already working with Amazon AWS, Microsoft Azure and Alphabet's Google Cloud, three of the top U.S. cloud players.
The Bears are making a case based on a short-term trend that could continue. That trend is related to Verizon wireless. Therefore, a continuation of the decline could be meaningful. Bulls make the case for the company's long-term growth. The stock is down 16% this year, which suggests that the bears are winning for now. Nevertheless, it will take the bulls a few years to prove their case. Therefore, we may want to wait until the winner of this confrontation is determined.
While the price is below the 46.00 level, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 43.29
- Take Profit 1: 42.00
- Take Profit 2: 40.00
Alternative scenario:
If the level of 46.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 46.00
- Take Profit 1: 48.00
- Take Profit 2: 50.00
