Why Verizon’s 4% Stock Jump Hides A Turnaround No One Is Pricing In

(SeaPRwire) –   By: Christian Pierce

The market cheers Verizon’s 4% premarket gain. Most analysts miss the real story here. The US telecom market has been saturated for a decade. Every major player fights for crumbs of subscriber share. Dan Schulman took over as CEO last October. He came in with one clear priority. He would end wasteful device subsidies and costly promotions. Investors have punished Verizon for years for stagnant growth. Its stock had underperformed the broader market for five straight years. The core problem was consistent churn and rising acquisition costs. Previous CEOs stuck to the same broken playbook. Many feared Schulman’s shift would crash subscriber growth. Today’s Q2 results tell a different story.

Verizon added 184,000 postpaid phone net subscribers in Q2. Analysts only expected 106,000 net additions. A year ago, the firm posted a net loss on this exact metric. Adjusted EPS hit $1.30, beating the $1.28 consensus estimate. Revenue came in at $34.3 billion, down 0.7% year over year. That missed the $35.2 billion analyst consensus target. The drop is not a mistake or a red flag. It is a deliberate outcome of Schulman’s stated strategy. Verizon pulled back sharply on device subsidies. Customers are holding onto their phones longer than before. That pushed equipment revenue down nearly 20% this quarter. Net income fell to $3.95 billion from $5.12 billion a year ago. The drop comes from $1.8 billion in pretax special items. Most of that is a $746 million loss from the new BT Group joint venture. The joint venture combines both firms’ international operations. It lets Verizon focus fully on its core home US market. Verizon also added 348,000 net broadband connections this quarter. Mobility and broadband service revenue rose 2.8% to $23.4 billion. Full-year retail postpaid phone net additions guidance stays on track. It remains at 875,000 to one million total net additions. The company expects service revenue growth to approach 3% in Q3. It sees growth hitting 4% in Q4 of this year. Schulman says the firm hit a step-change in churn reduction. It also cut overall customer acquisition costs. The firm raised full-year adjusted EPS guidance to $4.99–$5.04. It lifted mobility and broadband service revenue growth outlook to 2.5%–3%. It also cut 3,000 jobs and divested hundreds of retail stores to franchisees. It just launched a new unlimited plan for $30 for switchers. That price undercuts the standard $55 starting price for new plans.

I talked to a mid-sized telecom fund manager at an industry conference last week. He told me most investors still see Verizon as a slow, stagnant dividend play. No one has priced in the full impact of Schulman’s full strategy shift. The old telecom playbook relied on subsidizing expensive phones to grab subscribers. That model inflated customer acquisition costs and eroded long-term margins. It also trapped every major firm in a never-ending price war. The war hurt margins and customer loyalty for every player in the space. Schulman’s bet is that profitable, stable service growth beats chasing top-line revenue. He is willing to accept near-term top-line misses to build a healthier business. The early results from Q2 back that bet. Subscriber growth is up sharply from last year. Churn is down and acquisition costs are falling. Guidance is up even after the deliberate revenue shift. The BT joint venture lets Verizon offload distracting international work. Cost cuts and retail divestments free up cash for core network investments. The new discounted plan pulls price-sensitive customers from competitors. It does not blow up margins for existing higher-paying customers. Most US telecom incumbents are still stuck in the old playbook. They keep pouring money into device subsidies to hit arbitrary revenue targets. Verizon’s successful turn will force every major player to re-evaluate their own strategy. The first mover that nails this shift will take long-term market share from slower competitors.

Author bio: Christian Pierce, chief financial columnist and markets commentator focused on telecom sector strategy.