American broadband and communications company; Verizon Communications (NYSE:VZ) witnessed a drop of 4.05% in its shares this Tuesday’s closing. The price drop was the greatest this year since May 2014. Several research companies had made some target price reductions which resulted in this great fall. The stocks closed on Tuesday 9th Dec at $46.92 after a drop of a staggering $1.98 after a long and stable history of stock prices during this year.
This sudden fall in the company’s stock was due to recent cuts in Verizon Communication (NYSE:VZ) target prices by Robert W. Baird & Co. The researcher reduced the company’s (NYSE:VZ) target stock price from $54 to $50 for the next 12 months. Robert W. Baird & Co. reduced the target price estimates after Verizon reported some unrest in the subscribers during the fourth quarter. Moreover, the company Verizon (NYSE:VZ) said that this sudden drop in stock price estimates and the ongoing head to head competition would cause additional damage to the company’s (NYSE:VZ) repute.
In fact the firm also downgraded Verizon’s (NYSE:VZ) rating from Outperform to Neutral. Another company Credit Suisse Group AG (ADR) (NYSE:CS) also displayed a reduction in stock price estimates. The company (NYSE:CS) dropped the estimate value from $52 to $51 however they maintained the rating at Neutral. Verizon Communications (NYSE:VZ) is currently witnessing a high customer growth rate but because of rising prices the company (NYSE:VZ) seems to be facing churning and this churning is the real cause of the sudden drop in stock prices.
Joseph Mastrogiovanni, Credit Suisse Group’s (NYSE:CS) Analyst said that we can still witness the company Verizon (NYSE:VZ) facing a lot of competition than we were expecting. Competition is always bad for sensible investors and they usually avoid companies like this. Besides this, Verizon (NYSE:VZ) is sticking to its re-pricing strategy and has decided to stay out of the competition but the ongoing competition does mean vulnerability for Verizon’s (NYSE:VZ) customers.
However, Mastrogiovanni believes that this trick might have worked and the customer growth far more than the churning of subscribers. Plus the company Credit Suisse (NYSE:CS) is hopeful that Verizon (NYSE:VZ) will get 1.9 million customers during the fourth quarter, but their plan to count on Verizon resulted in a drop in their EPS. Then there’s Macquarie, who also reduced the target estimates prices per stock from $53 to $51.
The company believes that the churn in Verizon’s (NYSE:VZ) subscribers is because of Sprint’s latest price plans. However, company maintained the stock rating at Neutral. Verizon (NYSE:VZ) was quite stable for the past few months and the rival companies like AT&T and T – Mobile were in a bit of a competition for subscribers. This allowed Verizon to work its way through ARPU and maintain its profits. Verizon (NYSE:VZ) was successful in getting more subscribers than AT&T but the recent “Double Data” promotions have brought Verizon back into competition with Sprint and AT&T.