Verizon Stock Is 'Too Cheap to Ignore' on Earnings

Telecommunications giant Verizon Communications Inc. (VZ) is also a component of the Dow Jones Industrial Average. This stock is the cheapest among the 30 stocks in the average with a P/E ratio of just 6.63 and a dividend yield of 4.78%, making it the leader of the 2018 “Dogs of the Dow.” Verizon Wireless is one of the top smartphone platforms in the country.

Verizon stock closed last week at $50.62, down 4.4% year to date and 7.6% below its 2018 high of $54.77 set on Jan. 25. The stock set its 2018 low of $46.20 on March 23 and is 9.6% above this level. The stock is underperforming the Dow 30, which is up 1.3% year to date and is 5.9% below its all-time high of 26,616.71 set on Jan. 26.

Analysts expect Verizon to post earnings per share of $1.14 when the company reports second quarter results before the open on July 24. Investors should look beyond the earnings details to judge guidance related to new payment plans. Complicating this report will be the new tax code, which could adversely affect the financials. Investors should also keep an eye Oath, which is the combined platform for Verizon’s ownership of AOL and Yahoo. (See also: Verizon’s Discounted Stock Seen Rising 10% Higher.)

The daily chart for Verizon

Daily technical chart showing the performance of Verizon Communications Inc. (VZ) stockCourtesy of MetaStock Xenith

Verizon is above its 50-day and 200-day simple moving averages at $49.31 and $49.39, respectively. The stock held the horizontal line at 50.41 on Monday, which is my semiannual pivot. Above is my monthly risky level of $52.37. My quarterly value level lags at $44.08. My annual risky level is above the chart at $62.49.

[Check out Chapter 2 of the Technical Analysis course on the Investopedia Academy to learn more about using simple moving averages to develop your trading strategy.]

The weekly chart for Verizon

Weekly technical chart showing the performance of Verizon Communications Inc. (VZ) stockCourtesy of MetaStock Xenith

The weekly chart for Verizon is positive, with the stock below its five-week modified moving average at $50.19. The stock is also above its 200-week simple moving average, or “reversion to the mean,” at $49.06, which has been tested nearly each week since the week of Feb. 9. The 12 x 3 x 3 weekly slow stochastic reading rose to 75.56 last week, up from 68.73 on July 13.

My trading strategy is to buy Verizon shares on weakness to the 200-day simple moving average of $49.39 and reduce holdings on strength to my monthly and annual risky levels of $52.37 and $62.49, respectively. My semiannual pivot is a magnet at $50.41. (For more, see: Verizon, Charter Unfairly Punished: Goldman Sachs.)

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