Is Verizon or AT&T stock a better buy now?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 20, 2021
  • Verizon reported its most recent quarterly results on Wednesday before markets opened.
  • AT&T reports its fiscal Q3 results on Thursday pre-market.
  • With AT&T expected to emulate Verizon and beat earnings expectations, which stock should you buy?

On Wednesday, Verizon Communications Inc. (NYSE:VZ) shares surged 2.5% after announcing its most recent quarterly results. The company posted better than expected earnings per share but missed revenue estimates.

On the other hand, AT&T Inc. (NYSE:T) will announce its fiscal Q3 revenue and earnings on Thursday before markets open. Analysts are optimistic, forecasting significant earnings growth.

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So, which stock is the better buy?

Verizon Communications

Verizon reported FQ3 non-GAAP earnings per share of $1.41, beating the consensus Street estimate of $1.36. In addition, its GAAP EPS of $1.55 also came in ahead of estimates by $0.20, while revenue for the quarter edged slightly higher 4.4% Y/Y to $32.9 million, missing the average for analyst estimates by $340 million.

VZ trades at an attractive forward P/E ratio of 9.85, making it a compelling option for value investors. However, its forecasted annual growth of about 3.47 for the next five years, is less appealing to growth investors.

Source – TradingView

Technically, VZ trades within a descending channel formation in the intraday chart. However, the stock recently bounced off the key support level to surge towards the trendline resistance.

Nonetheless, with shares yet to reach overbought conditions, investors could target extended gains at $54.60 and $55.43, while $52.74 and $51.90 are crucial support levels.

AT&T

Analysts expect AT&T earnings to grow significantly to $0.78 per share, while revenue is forecasted to come in at about $41.4 billion. As a result, the stock price has bounced back recently to push its forward P/E ratio to about 8.10, making the stock an exciting option for value investors.

However, its annual 5-year earnings growth forecast of just 2.70% makes it less compelling to growth investors.

Source – TradingView

Technically, AT&T appears to be trading within a descending channel formation, indicating significant bearish bias in the market sentiment. However, the stock recently bounced off the key support to recover from oversold conditions of the 14-day RSI.

Therefore, with shares yet to reach overbought conditions, the current bull-run could continue post-earnings on Thursday. Investors could target profits at $26.74 and $27.64, while $25.35 is a crucial support zone.

T looks like the better buy

In summary, although both stocks seem lucratively valued despite offering less in terms of growth, AT&T trades at slightly more competitive valuation multiples. 

In addition, its dividend yield of 8.02% is significantly better than Verizon’s equivalent of 4.77%.

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