Verizon Communications Inc. (NYSE: VZ) last week reclaimed its status as the worst-performing stock among the 30 equities included in the Dow Jones Industrial Average. The telecom giant had ceded its last-place ranking to Chevron in the prior week.
The stock has lost 11.48% for the year to date, and the shares dropped by $1.37 last week (about 2.8%), with the big dip coming late Wednesday followed by another big dip on Friday.
When the company reported first-quarter earnings, the news on subscriber numbers absolutely killed investor enthusiasm for the stock.
Verizon lost 398,000 subscribers in the first half of the first quarter. Following the announcement in mid-February of its unlimited data plan, the company added 109,000 new subscribers and finished the quarter with 49,000 net additions.
Now that all four major U.S. wireless carriers have unlimited data plans, the carrier business has kicked off a race to the bottom. Where carriers once made handsome margins on usage overage charges, these are no longer available to subscribers to the unlimited plans. Instead, Verizon and its competitors throttle the connection speed once the “unlimited” package hits a certain level.
The point is that none of the companies can charge more for slowing the connection speed nor can a carrier call a plan “unlimited” if it charges more for data in excess of a given limit.
Analysts at Argus cut Verizon’s rating from Buy to Hold on Friday, citing the subscriber loss and a 20% drop in first-quarter profit.
Verizon’s stock closed down about 2.4% on Friday, at $47.25 in a 52-week range of $46.01 to $56.95. The consensus price target is $51.26.