November 24, 2020

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Technology is the natural beauty.

U.S. Group Verizon and South Korea’s Samsung Electronics Sign $6.65 Billion 5G Deal

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Verizon Communications, an American multinational telecommunications conglomerate, and South Korean multinational electronics company Samsung Electronics...

Verizon Communications, an American multinational telecommunications conglomerate, and South Korean multinational electronics company Samsung Electronics have announced to sign a deal worth $6.65 billion for 5G network equipment and services.

“With this latest long-term strategic contract, we will continue to push the boundaries of 5G innovation to enhance mobile experiences for Verizon’s customers,” Samsung said in a statement, Reuters reported.

Samsung noted in a regulatory filing the period of the contract, which Samsung signed with Verizon, is from June 30, 2020 to end-2025, Reuters added.

Samsung Electronics shares rose over 3% to KRW 58,300 on Tuesday. On the other hand, Verizon’s shares rose 0.12% to $60.55 in after trading hours on Friday and the stock is up about 2% so far this year.

Verizon stock forecast

Eleven analysts forecast the average price in 12 months at $62.30 with a high forecast of $70.00 and a low forecast of $57.00. The average price target represents a 3.01% increase from the last price of $60.48. From those 11 analysts, five rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $60 with a high of $71 under a bull-case scenario and $42 under the worst-case scenario. Verizon stock price forecast was raised by Deutsche Bank to $62 from $60.

Other equity analysts also recently updated their stock outlook. Verizon Communications had its price objective boosted by analysts at UBS Group to $60 from $59. The brokerage presently has a “neutral” rating on the cell phone carrier’s stock. Citigroup boosted their price objective to $60 from $55 and gave the stock a “neutral” rating. Oppenheimer reaffirmed a “buy” rating and set the price target at $70.

Analysts’ views

“Attractive business mix, as wireless market leader. Wireless service revenue 70% of consolidated revenue, and wireless EBITDA 85% of consolidated EBITDA. Dividend yield and potential buybacks provide some support, while the transition to 5G creates opportunities and risks, with mid-band spectrum needs in focus,” said Simon Flannery, equity analyst at Morgan Stanley.

“Our price target for Samsung Electronics is W70,000: We continue to employ a residual income (RI) valuation model, cross-checked against P/BV analysis. At our W70,000 price target, the 2021 P/B multiple would be 1.4x, which is in line with its long-term mid-cycle valuation level of 1.4x. Our terminal growth rate assumption is 5%, and we assume an 11.5% cost of equity, based on a beta of 1.0,” said Shawn Kim, equity analyst at Morgan Stanley.

Upside and Downside risks

Upside: 1) Continued strength in wireless. 2) Rates remain lower for longer. 3) Defensive market. 4) Developments around mobile video, and internet of things – highlighted Morgan Stanley.

Downside: 1) Rising interest rates make the dividend yield less attractive. 2) Competitive price pressure from wireless competitors. 3) Wireline business faces significant secular pressures. 4) Spectrum spend/M&A pressure Balance Sheet metrics.

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This article was originally posted on FX Empire

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