Verizon Is Looking to Acquire Growth: 5 Companies That May Be Targets

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For the first time in the company’s long history, Verizon Communications Inc. (NYSE: VZ) lost a whopping 307,000 wireless customers in the first quarter. The company’s stock is down almost 14%, making it the worst performing stock in the venerable Dow Jones Industrial Average.

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.

Verizon and AT&T had combined subscriber losses of almost a half a million customers, which added up to big gains for the competition. In a new research report, Merrill Lynch makes the case that it is “game on” for Verizon, as merger discussions that were prohibited under anti-collusion rules will be possible now.

The analysts noted that the company, via press reports, has been linked to five potential strategic partners. All five would be expensive targets, but each could add the kind of programming content and distribution that is so highly valued now. Interestingly, four of the five are rated Buy at Merrill Lynch.

CBS

This large cap broadcaster has nicely bounced off the lows printed last fall but still could be an incredible value. CBS Corp. (NYSE: CBS) may be in the best position of all the broadcast networks with an outstanding prime time lineup, solid sports franchises like the NFL, March Madness College Basketball, The Masters and other top programming, the venerable network could once again be an outstanding stock for shareholders.

The company is leading in the ratings and is poised to continue the network’s programming dominance in 2016. The broadcasting giant is now in the midst of a significant stock repurchase process, and many on Wall Street expect the company to shrink its share base by around 25% over the next two years.

CBS shareholders receive a 1.27% dividend. The Merrill Lynch price target for the stock is $78, and the Wall Street consensus figure is $73.59. Shares closed Friday at $66.56.

Charter Communications

This top cable giant also has been closely linked to Verizon in takeover chatter. Charter Communications Inc. (NASDAQ: CHTR) is a leading broadband communications company and the fourth-largest cable operator in the United States. It provides a full range of advanced broadband services, including Spectrum TV video entertainment programming, Spectrum Internet access and Spectrum Voice.

Spectrum Business similarly provides scalable, tailored and cost-effective broadband communications solutions to business organizations, such as business-to-business internet access, data networking, business telephone, video and music entertainment services and wireless backhaul.

Top Wall Street analysts have cited potential growth and strong free cash flow generation following the merger with Time Warner Cable and Bright House Networks as a huge positive. They also note they feel that the merger concerns are way overblown and they expect the company to aggressively seek subscriber acquisition.

The $360 Merrill Lynch price target compares with consensus target of $358.60. The shares closed Friday at $345.16.