NEW YORK (TheStreet) -- Shares of Verizon Communications (VZ) are down 0.42% to $45.34 in pre-market trading after Goldman Sachs analysts downgraded the company to "neutral" from "buy" and lowered its price target to $48 from $55.
"Our downgrade reflects higher costs of spectrum, higher churn and lower margins due to intensifying wireless competition and lower target multiples to reflect an uncertain outlook as the competitive landscape shifts," Goldman said.
"We lower our 4Q14E EPS to 71 cents from 77 cents (consensus 76 cents) and our 2015E EPS to $3.67 from $3.81 (consensus $3.74)," they noted.
Goldman continues to view Verizon as the best-in-class wireless carrier, largely on its strong network reputation and large base of high-value customers.
However, growing wireless competition, primarily in the form of promotional activity at both Sprint Corp. (S) and T-Mobile (TMUS) , appears to be having a greater-than-anticipated impact on subscriber trends and financial results, in their view.
Separately, TheStreet Ratings team rates VERIZON COMMUNICATIONS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate VERIZON COMMUNICATIONS INC (VZ) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, compelling growth in net income, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- VZ's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 4.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, VERIZON COMMUNICATIONS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 65.5% when compared to the same quarter one year prior, rising from $2,232.00 million to $3,695.00 million.
- The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 61.21%. Regardless of VZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VZ's net profit margin of 11.69% compares favorably to the industry average.
- VERIZON COMMUNICATIONS INC has improved earnings per share by 14.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, VERIZON COMMUNICATIONS INC increased its bottom line by earning $4.00 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 14.3% in earnings ($3.43 versus $4.00).
- You can view the full analysis from the report here: VZ Ratings Report