Verizon Communications Inc. (VZ) replaces Exxon Mobil this week as the worst-performing stock on the Dow Jones Industrial Average (DJIA) index, a position it last held in February. The stock has lost 8.84% for the year to date.
The shares dropped by just nine cents last week (less than 0.2%), but that was enough to drop the stock to the bottom of the Dow 30.
Investors remain concerned about the hit to revenues that may follow the adoption of the company's unlimited data plan. With all four major U.S. wireless carriers now offering unlimited data plans, has the industry embarked on a race to the bottom?
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Analysts at Jefferies warned:
While the industry remains bullish on growth in data usage, and metered plans allow for some continued enthusiasm, the move by every carrier to unlimited plans will cause carriers to hope for less and less data usage. Almost every pricing action over the last couple of years has continued to take the roof down on ARPU growth opportunities as more and more data was offered for the same, or lower price point. Now with the advent of unlimited plans, the upside from additional usage is gone for those choosing aggressively priced unlimited plans.
Verizon did pay its quarterly dividend of $0.578 per share last week, a yield of 4.75%, the best among the Dow 30 stocks. That salves some of the pain in the decline in share price, but clearly not all of it.
The acquisition of Yahoo is on its way to completion, but the concern there is how Verizon will perform as a media company. Can the wireless carrier boost its revenue by competing in the crowded media space enough to overcome the revenues it is giving up as it competes for more wireless business?
Verizon's stock closed up about 0.5% on Friday at $48.66 in a 52-week range of $46.01 to $56.95. The consensus price target is $51.82.