Is Verizon Stock a Buy After Its Recent Record Move?

With shares of Verizon (NYSE:VZ) trading around $46, is VZ an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Verizon is a provider of communications, information, and entertainment products and services to consumers, businesses, and governmental agencies. It operates in two primary segments: Verizon Wireless and Wireline. Verizon Wireless's communications products and services include wireless voice, data services, and equipment sales, which are provided to consumer, business, and government customers across the United States. Wireline's communications products and services include voice, Internet access, broadband video and data, Internet protocol network services, network access, long distance, and other services.

Verizon plans to sell between $45 billion and $49 billion in bonds to finance its $130 billion buyout of Vodafone's (NASDAQ:VOD) 45 percent stake in Verizon Wireless. The eight-part record bond offering could begin as soon as Thursday, according to sources who spoke to Bloomberg. The offering will consist of fixed-rate debt with maturities ranging between three and 30 years and two sets of floating-rate securities, sources said.

T = Technicals on the Stock Chart Are Mixed

Verizon stock has been part of an uptrend over the last several years. In the last few months, the stock has been pulling-back and heading towards opening prices for the year. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Verizon is trading above its below key averages which signal neutral to bearish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Verizon options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Verizon Options	22.83%	70%	69%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
October Options	Steep	Average
November Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Rising Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Verizon’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Verizon look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	14.06%	15.25%	-107.21%	14.29%
Revenue Growth (Y-O-Y)	4.32%	4.17%	5.66%	3.92%
Earnings Reaction	-1.51%	2.76%	0.58%	2.37%

Verizon has seen rising earnings and revenue figures over the last four quarters. From these numbers, the markets have mostly been happy with Verizon’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Verizon stock done relative to its peers AT&T (NYSE:T), T-Mobile (NASDAQ:TMUS), Sprint (NYSE:S), and sector?

	Verizon	AT&T	T-Mobile	Sprint	Sector
Year-to-Date Return	7.33%	1.51%	27.21%	16.31%	10.38%

Verizon has been an average relative performer, year-to-date.

Conclusion

Verizon provides communications products and services through a variety of mediums to consumers and companies around the world. The company is involved in a record-breaking bond offering that is being used for the purchase of Vodafone’s stake in Verizon Wireless. The stock has not been doing well in the last several months as it continues to pull-back. Over the last four quarters, investors have mostly been happy as earnings and revenues have been rising. Relative to its peers and sector, Verizon has been an average year-to-date performer. WAIT AND SEE what Verizon does this coming quarter.