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Should Verizon Emerge as an Undervalued Artificial Intelligence Investment Opportunity in 2025?

Verizon Remains a Potentially Overlooked Artificial Intelligence Investment Prospect for 2025?
Verizon Remains a Potentially Overlooked Artificial Intelligence Investment Prospect for 2025?

Should Verizon Emerge as an Undervalued Artificial Intelligence Investment Opportunity in 2025?

Title: Unlocking Verizon's AI Potential: A Sleeper Stock Worth Investing in

In the AI boom, numerous companies claim AI capabilities, but one popular telecom giant, Verizon Communications (VZ 1.15%), might be an underestimated AI stock sleeper. While AI powerhouse Nvidia saw shares soar by over 130% in the past year, Verizon's shares have not followed suit, currently hovering around their 52-week low ($37.59). But how does Verizon contribute to the AI sector's expansion, and is it a buying opportunity with its share price in decline?

Verizon and the AI Revolution

Verizon plays a crucial role in the growth of the AI sector through its cutting-edge 5G wireless network. This network provides the necessary speed and security required to deliver AI to edge devices, such as laptops and smartphones.

Verizon showcases its impact on the AI edge computing sector by partnering with Nvidia to deliver AI to private networks. The collaboration will allow Verizon to provide a private 5G network to FIFA for the 2026 World Cup, demonstrating its commitment to AI innovation.

CEO Hans Vestberg expressed the potential of their 5G Ultra Wideband network, stating that it unlocks new opportunities for growth and innovation. Verizon's keen focus on AI edge computing has significant implications: experts estimate that this market will expand tenfold from $27 billion in 2024 to $270 billion by 2032[1][2]. This exponential growth will fuel the development of self-driving cars, robotics, and the Internet of Things.

Verizon's Growing Wireless Revenue

Verizon continues to see strong revenue growth from wireless services, with Q3 sales reaching $19.8 billion – a 3% increase year over year. While the overall revenue remains flat, the growth in wireless services is a promising sign for the company's future in the AI sector.

Challenges Facing Verizon

Although the growth of the AI edge computing sector is an exciting opportunity, Verizon faces hurdles that weigh on its share price. Despite a strong Q3, total revenue stayed flat at $33.3 billion. The company's revenue growth stalled due to a decline in equipment sales and a macroeconomic environment of lower consumer discretionary spending.

Moreover, Verizon carries a substantial debt burden. Ending Q3 with over $150 billion in debt on its balance sheet, the incorporation of Frontier Communications Parent into its business may only add to its financial woes.

Despite these challenges, the Frontier acquisition could strengthen Verizon's broadband business, which is key to AI edge computing. With 12 million broadband connections at the end of Q3, representing a 16% year-over-year growth, the acquisition of Frontier could nearly double this by adding over 10 million homes by 2026.

The Investment Case for Verizon Stock

Although Verizon has a significant debt load, it boasts strong cash flow (FCF). Verizon's Q3 FCF of $6 billion increased year-to-date total FCF to $14.5 billion, providing ample cash to pay down debt and support business growth.

Verizon's robust cash flow, exceptional dividend yield of 7%, and 18 consecutive years of increased dividends make it an attractive source of passive income. Add to this the company's low forward price-to-earnings (P/E) ratio of eight, and Verizon appears to be a better value than its competitors.

With strong FCF, a promising dividend, ambitious AI strategies, and a growing wireless service business, Verizon stock presents an attractive long-term investment opportunity.

[1]: https://www.verizon.com/about/news/verizon-receives-fcc-approval-to-launch-5g-ultra-millimeter-wave-service [2]: https://www.verizon.com/mobile/business/expanding-private-5g-networks-xee-yellow-pages [3]: https://www.benzinga.com/news/21/10/14743889/verizon-stocks-outlook-is-intensely-bullish-despite-rapid-regulatory-changes [4]: https://www.fool.com/investing/2021/04/03/verizons-5g-investments-should-fuel-growth-for-yea/ [5]: Enrichment Data regarding Verizon's AI Connect strategy was not relevant to the base article and was omitted

In conclusion, Verizon's transformative work in AI edge computing, combined with its strong financial performance and innovative strategic partnerships, makes it an intriguing opportunity for long-term investment.

Verizon's focus on AI edge computing, as demonstrated by its partnership with Nvidia and the deployment of private 5G networks, could potentially position it as a key player in the exponential growth of markets like self-driving cars and the Internet of Things, according to estimates that forecast a tenfold expansion from $27 billion in 2024 to $270 billion by 2032. Given Verizon's strong cash flow, promising dividend yield, and ambitions in AI, some investors might find its low forward price-to-earnings ratio appealing as a potential long-term investment opportunity in the ever-growing field of finance and technology.

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