Verizon Communications Inc. (VZ) Is Primed For a Big 2018

Wayne Duggan

Verizon Communications Inc. (NYSE: VZ) stock appears set for big things in 2018, as Wells Fargo upgraded the stock from "market perform" to "outperform" and raised its price target from $48 to $50.

The U.S. economy has been booming in 2017, but wireless giants Verizon and AT&T ( T) have struggled to grow in an increasingly saturated market. On top of slowing wireless service growth, Verizon has been investing heavily in its next-generation 5G network. Verizon stock is down 14 percent year-to-date, while AT&T shares are down 18 percent.

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However, analyst Jennifer Fritzsche says Verizon's struggles to grow wireless revenue are now fully reflected in the stock's share price, and things are looking up for Verizon stock headed into 2018.

"We expect to hear more sooner versus later of the company's fiber initiative and the math behind it," Fritzsche writes in a note to investors, according to FierceWireless. "We believe the plan will lay out a convincing case for both revenue growth and cost containment."

Verizon spent a combined $4.9 billion on buyouts of Straight Path and XO Communications earlier this year to beef up fiber assets ahead of the rollout of 5G. Verizon has been testing its network in select cities throughout the year. In the company's third-quarter earnings call, CFO Matthew Ellis says 5G trials are going "very well" and that the company still plans on launching its fixed 5G broadband network in 2018.

In addition to the 5G rollout, Verizon may look to continue growing via acquisitions as well. Verizon is one of several companies reportedly negotiating with Twenty-First Century Fox ( FOXA) to acquire Fox's international assets, movie studio and cable and regional sports networks.

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In the meantime, investors can enjoy Verizon's generous 5.1 percent dividend, the highest yield among all 30 Dow Jones industrial average components. Fritzsche says the stock's top-tier dividend and modest 11.7 forward price-earnings ratio limit downside and make Verizon an attractive value heading into what could be a landmark year for Verizon and its investors.

Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.