By Jack Hough

An examination of the stock charts of Verizon and AT&T reveals a Trading Places pattern. That's the 1983 movie where Dan Aykroyd plays a commodities poobah who winds up behind bars, and Eddie Murphy is a street hustler who moves into Aykroyd's job and home. Today, former telecom leader Verizon has fallen out of favor, and longtime dog AT&T has suddenly shot ahead. If the movie is any guide, what comes next could involve a gorilla suit, a prostitute with a heart of gold, and orange-juice futures. Maybe a likelier outcome is just a higher stock price for Verizon.

In March of last year in this space, I braced for boos and outlined the bull case for AT&T, as laid out for me by Wolfe Research analyst Peter Supino. After many years of squander and folly, a streamlined AT&T was paying down debt and rolling out fiber for broadband. The dividend yield was credible and humongous--6.5% at the time. AT&T wasn't the best company, but it looked like the best stock, as Supino put it.

Since then, AT&T has led the group, returning 87%, compared with 62% for T-Mobile US, and 26% for Verizon. The S&P 500 has returned 27%. If we strip out dividends, Verizon looks much worse. Since that column, it has lagged behind the stock market by 10 points. Over the past five years, it's the only one of the big three telecoms to fall in price--by 24%.

What has gone wrong for Verizon? Not as much as you might think. T-Mobile has long been the industry insurgent, and it got a big boost in spectrum through its 2020 merger with Sprint. More recently, Verizon and AT&T have expanded to some rural markets where Verizon had enjoyed high market share. Meanwhile, tariff talk this past spring sent phone buyers to stores to get ahead of higher prices, and telecoms ramped up discounts to compete for share. There's also a population headwind: The number of immigrants in the U.S. appears to be shrinking for the first time since the 1960s, according to reports from the Pew Research Center.

All of this has combined to make Verizon a modest market-share donor at times. Last quarter, it lost a net 51,000 wireless postpaid consumer accounts, versus shedding 109,000 the quarter before. But average revenue per account was up, along with earnings and free cash flow, helped by solid growth in fiber broadband service. "We're not gonna overpay for growth," says Chief Financial Officer Tony Skiadis.

AT&T is suddenly a consensus Buy, with 60% of analysts who cover it recommending a purchase. That compares with just 44% who like Verizon. But for bargain hunters, there are some signs that Verizon deserves a closer look. At 9.4 times forward earnings estimates, Verizon recently traded at a 30% discount to AT&T, versus a 30% premium five years ago. And Verizon has become the high-yielder of the group; its 6.1% dividend recently ranked 11th-highest in the S&P 500. The company has raised payouts for 18 straight years. "Our goal is to put the board in a position to increase the dividend once again," says Skiadis. An announcement on that could come in early September.

Telecoms, flush with cash flow following peak 5G investments, have been raiding the cable industry for its broadband customers. In May, Verizon won regulatory approval for a $20 billion purchase of Frontier Communications, which will add millions of new fiber broadband customers to its Fios service base. The company has found that when customers bundle wireless service with fiber broadband, churn, or account cancellations, tend to fall for both.

T-Mobile is easily the investor darling of the big three, at 24 times earnings. But KeyBanc Capital Markets analyst Brandon Nispel, who had downgraded the stock to Sector Weight last December on valuation, took it down to Underweight last month, calling the company "fiber deficient." Its fiber connections recently passed a half million households, versus 18 million for Verizon and 30 million for AT&T. T-Mobile plans to spend aggressively on fiber through the end of the decade, but it's unlikely to come close to catching up with its rivals. Meanwhile, after years of T-Mobile using discounts to win market share, the company's pricing at the mid and high end of wireless service now looks comparable to AT&T and Verizon, writes Nispel.

Raymond James analyst Frank Louthan, who rates Verizon at Outperform, says that what investors want to see is a return to wireless subscription gains, and that the company has taken steps to get there. "I do believe when they close the Frontier deal next year, and as they continue to bundle with fixed wireless, they'll have that ability to do that," he says. It takes a while. It's like turning an aircraft carrier."

Verizon's Skiadas says he thinks investors want to hear more details about fiber deployment, spending, and growth prospects following the Frontier deal, and that the company will have more to say on that soon. "We have a very high-quality customer base and we're very bullish about the future, and that future includes continuing to deliver both growth in mobility and broadband," he says.

If holding out for a Verizon bounce while collecting big dividends sounds too sleepy, Louthan at Raymond James has something spicier. His top pick in telecom is tiny Uniti Group, which consists of a broadband player that had previously spun off its network assets to be managed for income, but recently recombined with them to go all-in on converting copper lines to fiber. That makes it look a bit like Frontier. "This is another asset that we think is going to be attractive to some of the carriers over the next year or two," says Louthan. This month he raised his price target from $8 to $11. Shares recently traded around $6.

Write to Jack Hough at jack.hough@barrons.com

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August 22, 2025 12:49 ET (16:49 GMT)

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