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Verizon Lifted to Conviction Buy at Goldman on Risk-Return Balance

Verizon shares were upgraded to conviction buy at Goldman Sachs, which cited its attractive risk-return balance.

Verizon Communications  (VZ) - Get Verizon Communications Inc. Report shares were upgraded to conviction buy from buy at Goldman Sachs. 

The stock offers investors "the most attractive combination of total return and risk owing to its stable wireless business, well-covered dividend (a 4.6% yield) and strong balance sheet,” analyst Brett Feldman said in upgrading the nation’s biggest wireless carrier.

Verizon shares have fared better than the overall market during the coronavirus pandemic, as investors and analysts like its stable revenue stream. Consumers have been heavy users of mobile devices since the scourge spread.

Many workers who have been sent home are using their mobile phones in place of their office phones.

Verizon stock has dropped 12% since the S&P 500 index peaked Feb. 19, while the index itself has plunged 20%.

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Feldman lowered his share-price target for Verizon to $61 from $67 to reflect the recent decline.

The telecom giant has “stable/growing earnings per share and free cash flow, even in a tougher economy,” Feldman said.

“This is because a large majority Verizon’s revenues come from selling wireless connectivity services to consumers and businesses in the U.S. 

["These] services are relatively non-discretionary and will see less of an impact from potential drops in consumer and business spending.”

Morningstar analyst Michael Hodel puts Verizon in a “handful of U.S. large-cap firms that have dropped meaningfully, allowing investors to purchase shares in businesses that should deliver consistent cash flow over time at good valuations.”

At last check Verizon shares stood at $53.10, off 1.2%.