Why Verizon Stock Dropped Today

Subscriber losses and a guidance cut alarmed investors.

Subscriber losses and a guidance cut alarmed investors.

What happened 

Shares of Verizon ( VZ -5.63% ) fell 5.8% on Friday after the wireless giant cut its full-year growth forecast. 

So what

Verizon’s revenue rose 2.1% year over year to $33.6 billion in the first quarter. This growth was driven in part by Verizon’s acquisition of TracFone Wireless, a leading value-priced wireless services provider, in November. 

Growth in Verizon’s broadband internet business also contributed to its revenue gains. The telecom leader added 229,000 net broadband customers, including 194,000 fixed wireless accounts and 60,000 Fios Internet subscribers.

“Our operational performance in the first quarter further positions Verizon for long-term growth and increases our competitive standing in mobility, nationwide broadband, the value market, and above-the-network business solutions and applications,” CEO Hans Vestberg said in a press release.

A person is looking at a mobile phone.

Image source: Getty Images.

Still, Verizon lost 36,000 postpaid phone connections. These people pay monthly bills and are often some of the most profitable customers for wireless companies. The decline suggests that Verizon lost market share to rival AT&T ( T -3.41% ) in this key customer segment. AT&T said yesterday it added 691,000 net postpaid phone subscribers during the first quarter. 


All told, Verizon’s adjusted earnings declined by less than 1% to $1.35. And its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) — a key metric for capital intensive wireless providers — decreased by 1.1% to $12 billion. 

Now what 

The challenging competitive and macroeconomic environment drove Verizon to rein in investors’ expectations. Management now sees growth in wireless service revenue and EBITDA at the low end of its previously forecasted ranges of 9% to 10% and 2% to 3%, respectively.

 

Read this article on Motley Fool

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