Many telecom stocks have been under pressure this year, as investors worry about the threat that Space Exploration Technologies Corp (NASDAQ:SPCX) poses to the industry.
Verizon Communications (NYSE:VZ) is a prime example of that. While it posted strong results this year, which initially sent its stock soaring, it’s been going in the opposite direction in recent months, with SpaceX CEO Elon Musk making it known that the company plans to turn its Starlink business into a major mobile carrier.
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But that doesn’t mean it’s going to be a cakewalk by any stretch. And Verizon’s CEO has made it clear that the telecom giant isn’t just going to hand over market share.
Image source: Verizon.
Why it may not be easy for Starlink to become a major player
Verizon CEO Dan Schulman has been fielding questions about the risk from SpaceX on the company’s recent earnings call, as that’s been top of mind for many analysts and investors of late. Schulman estimates that for SpaceX to truly compete, it’ll need to build out a significant terrestrial network, which will take several years and cost hundreds of billions of dollars.
Schulman also warns that the experienced telecom provider will protect its business and compete aggressively if Starlink goes for market share in the mobile market; it won’t be easy. “Frankly, at that point, I welcome the opportunity to compete against them. It’s very hard to throw a punch against something that doesn’t exist, but once they come into the market, we will be ferociously competitive.”
Verizon may be one of the best dividend stocks to buy right now
While the market obsesses over the SpaceX threat, Verizon continues to chug along and post solid numbers. It reported solid third-quarter earnings last week, with postpaid phone net adds being the best they’ve been in five years. And its quarterly net account growth was the highest it’s been in more than a decade.
Verizon’s business is performing incredibly well, and yet many investors are fearful of owning the stock due to the SpaceX risk, which could prove to be a big mistake in the future. Trading at just eight times its estimated future profits, based on analyst expectations, it’s an incredibly cheap stock to own. Plus, it offers an exceptionally high yield of 6.3%.
When the market overreacts like this, it can be an excellent time to buy a quality stock like Verizon at a great price. Investors seeking a high payout without taking on much risk should consider this top dividend stock today.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
Verizon’s CEO Has a Warning for SpaceX and Its Mobile Plans was originally published by The Motley Fool