Verizon’s 2026 Outlook

Revenue Guidance: ~$93B in mobility/broadband service revenue (2-3% growth) Adjusted EPS: $4.90-4.95 (4-5% growth) Current Price Context: At ~$40-41/share, this implies a forward P/E of roughly 8.1-8.4x Dividend Yield: ~6.5% (extremely high, potential warning signal)

Key Turnaround Catalysts

1. Volume Momentum (Big Shift)

• Q4 2025: 616K postpaid phone adds (best since 2019)
• 2026 Target: 750K-1M postpaid phone adds (2-3x 2025 levels)
• Total broadband/mobility adds >1M in Q4 (highest since 2019)
• Translation: Verizon is finally winning customers instead of bleeding them

2. Frontier Acquisition (Game Changer)

• Closed January 20, 2026 for ~$20B
• Expands fiber footprint to 30M+ homes/businesses
• Creates convergence play (mobile + fiber bundling)
• 16.3M total fixed wireless + fiber connections
• Building 2M+ new fiber passings in 2026

3. Financial Targets

• Free cash flow: $21.5B+ (7% growth, highest since 2020)
• CapEx: $16-16.5B (disciplined spending)
• Operating cash flow: $37.5-38B
• Key: Growing FCF while investing heavily = operational efficiency

4. New Leadership (CEO Dan Schulman)

• “Play to win mandate” – cultural shift
• “No longer a hunting ground for competitors”
• Speed of decision-making increased
• Past 100 days showing momentum

Industry Comparison

Telecom Peers

AT&T (T)

• Similar size, similar challenges
• Dividend yield: ~5.5% (lower than VZ)
• P/E: ~9-10x (slightly higher valuation)
• Shedding assets (media properties), focusing on core
• Verdict: Similar boat, but VZ has better momentum post-Frontier

T-Mobile (TMUS)

• The growth story in telecom
• P/E: 22-25x (premium valuation)
• Leading in subscriber growth, 5G coverage
• No meaningful dividend (growth stock positioning)
• Verdict: TMUS is the “tech stock” of telecom; VZ is the “value/income” play

Comcast (CMCSA)

• Cable/broadband competitor
• Facing cord-cutting headwinds
• P/E: 10-12x
• Dividend yield: ~3%
• Verdict: VZ’s fiber strategy directly threatens legacy cable

Charter Communications (CHTR)

• Pure cable play
• Amended MVNO deal with VZ (important partnership)
• More leverage, higher risk
• Verdict: VZ is safer, more diversified

Key Differentiators

Verizon’s Strengths:

1. Network quality: Still considered premium
2. Fiber expansion: Frontier deal creates scale
3. Fixed wireless: 5.7M subscribers, growing rapidly
4. B2B relationships: Enterprise/government contracts sticky
5. Dividend: 6.5% yield attracts income investors

Verizon’s Weaknesses:

1. Debt load: $131B unsecured debt (7.4x net income)
2. Growth history: Years of subscriber losses
3. Execution risk: Turnaround is 100 days old
4. Capital intensity: Telecom requires constant CapEx
5. Competition: T-Mobile eating market share for years

Conservative Projection (2026-2028)

2026 (Guidance Year)

• Revenue: ~$140B total (including Frontier)
• Adjusted EPS: $4.93 (midpoint)
• FCF: $21.5B
• Stock: $40-46 range (8-9x P/E)
• Dividend: Likely maintained at $2.66/share

2027 (Integration Year)

• Revenue: $142-145B (modest growth, Frontier synergies)
• Adjusted EPS: $5.10-5.30
• FCF: $22.5-23B
• Stock: $42-50 (8.5-9.5x P/E)
• Key Risk: Frontier integration costs/delays

2028 (Proof Point)

• Revenue: $148-152B (if turnaround succeeds)
• Adjusted EPS: $5.40-5.70
• FCF: $23.5-24.5B
• Stock: $46-57 (9-10x P/E if re-rating occurs)
• Upside Scenario: Dividend raised if debt reduced

Critical Metrics to Watch

Debt Management (THE BIG ISSUE)

• Net unsecured debt: $110B
• Debt-to-EBITDA: 2.2x (manageable but high)
• Frontier added ~$11B in debt
• Must see: Debt reduction by 2027 or dividend at risk

Subscriber Momentum

• Q1-Q2 2026 must confirm Q4 2025 wasn’t a fluke
• Fixed wireless growth must continue (threatens cable)
• Business segment stabilization needed

Frontier Integration

• Synergy target: Typically $500M-1B annually
• Churn risk: Acquired customers leaving
• Cross-sell success: Mobile + fiber bundles

Risk-Adjusted Return Scenarios

Bull Case (25% probability): $52-58 by 2028

Triggers:

• Subscriber growth sustains 750K+ annually
• Frontier integration exceeds expectations
• T-Mobile momentum slows
• Debt reduced to <2.0x EBITDA
• 3-year return: ~35-40% + 19% dividends = 55%+ total

Base Case (55% probability): $44-50 by 2028

Triggers:

• Modest subscriber growth (500K/year)
• Frontier integration on plan
• Market share stabilizes vs. T-Mobile
• Dividend maintained, debt flat
• 3-year return: ~10-20% + 19% dividends = 30-40% total

Bear Case (20% probability): $32-38 by 2028

Triggers:

• Subscriber growth fades post-2026
• Frontier integration problems
• Forced to cut dividend (debt servicing)
• T-Mobile/cable keep gaining share
• 3-year return: -15% to -5% + dividends = 5-15% total (or negative if div cut)

Versus Industry Positioning

Valuation Table

Company	P/E	Div Yield	FCF Yield	Growth Rate
VZ	8.3x	6.5%	~13%	4-5% EPS
T	9.5x	5.5%	~11%	3-4% EPS
TMUS	24x	1.6%	~5%	10-12% EPS
CMCSA	10x	3.0%	~8%	Flat

VZ offers: Highest yield, lowest valuation, moderate growth potential

Bottom Line Assessment

What’s Different This Time?

Positives (Why This Could Work):

1. New CEO energy: Schulman has credibility (ex-PayPal)
2. Frontier scale: Fiber to 30M homes changes competitive position
3. Fixed wireless traction: 5.7M subs validates wireless-as-broadband
4. Volume inflection: Q4 adds were real, not promotional gimmicks
5. Valuation floor: 8x P/E with 6.5% yield limits downside

Negatives (Why Skepticism Warranted):

1. Debt overhang: $131B is a LOT; Frontier adds $11B more
2. Track record: Verizon has promised turnarounds before
3. T-Mobile threat: Still the industry growth leader
4. Execution risk: Integrating Frontier while transforming culture is HARD
5. Dividend trap risk: 6.5% yield can signal market doesn’t believe sustainability

Industry Position Summary

VZ is the “Show-Me” Story:

• Cheaper than: PFE (VZ has better cash flow visibility)
• Safer than: CHTR (less cord-cutting exposure)
• Riskier than: T (more debt, higher dividend commitment)
• Slower than: TMUS (but 1/3 the valuation)

For Protected Wheel/Collar Strategy

EXCELLENT candidate because:

1. High implied volatility: Option premiums very attractive
2. 6.5% dividend: Enhances covered call returns significantly
3. Mean reversion setup: Stock has been range-bound $38-44 for years
4. Defined risk: Unlikely to drop below $35 (8% yield would attract buyers)
5. Clear catalysts: Quarterly subscriber numbers provide trading points

Optimal Strategy:

• Sell puts: $37-38 strike (collect premium, willing to own at <9x P/E)
• Covered calls: $44-46 strike (cap upside but collect premium + dividend)
• Expected annual return: 12-15% (dividends + options) with downside protection

Final Verdict: Income Play with Turnaround Optionality

If you need income TODAY: VZ is compelling at 6.5% yield IF you believe dividend is sustainable (I assign 75% probability it’s maintained through 2028).

If you want growth: Buy TMUS instead; VZ won’t triple even in best case.

Risk/Reward: VZ offers 4:1 upside/downside from $40:

• Upside: $52-58 (30-45% gain) if turnaround works
• Downside: $34-36 (10-15% loss) if dividend cut forces re-rating
• Most likely: $44-48 (10-20% gain) + 19% in dividends over 3 years

The bet you’re making: Dan Schulman can execute a telecom turnaround in the shadow of T-Mobile’s dominance, while servicing massive debt and maintaining a dividend that pays out 80%+ of free cash flow.

My take: More credible than most telecom turnarounds, but the dividend limits capital flexibility. It’s a “yield + modest growth” story, not a compounder.

Sonnet 4.5

Clau