Short interest in Verizon fell over 9 million shares in November to 35.3 million. It would appear that at least some on Wall St. do not want to underestimate Verizon’s bet on fiber-to-the-home.
The drop in short interest is certainly not in line with recent criticisms of the strategy. AT&T’s investment in fiber is much less than Verizon’s. An executive from British Telecom recently opined that the service would not get nearly as many takers as Verizon has projeced. Taking the other side of the argument, Barron’s wrote that Credit Suisse recently upgraded Verizon, arguing the the fiber return on investment could be very strong at under 20% market penetration.
The Verizon gamble is still fraught with risk. The company is investing $18 billion in the technology. The company forecasts it will have 3 million to 4 million subscribers by 2010, a 20% penetration of homes passed by the service.
Some short sellers may be exiting the stock which has dropped from nearly $39 at the end of October to it current price of $34.75.
As Verizon gets deeper into its investment, and the early results of subscriber growth become apparent, the bets on Wall St. will increase.
The lines are drawn.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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