Is Verizon Stock Ready to Rise?

With shares of Verizon (NYSE:VZ) trading around $49, 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 and 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 delivered a profit and beat Wall Street's expectations, however, it came-up short on beating the revenue expectation. The revenue miss is a negative sign to shareholders seeking high growth out of the company. As consumers and companies strive to communicate at increasing rates, Verizon stands to see a rising profits as a main provider. Look for rising communications, information, and entertainment to drive profits for Verizon.

T = Technicals on the Stock Chart are Mixed

Verizon stock has been surging higher in recent years. The stock is now trading at prices not seen for nearly a decade. 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 between its key averages which signal neutral 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	12.71%	3%	1%

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

	Put IV Skew	Call IV Skew
August Options	Steep	Average
September 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 small amount of call and put option contracts and are leaning neutral to bearish over the next two months.

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

E = Earnings Are Increasing 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	-1.52%*	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 pleased with Verizon’s recent earnings announcements.

* As of this writing

P = Excellent Relative Performance Versus Peers and Sector

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

	Verizon	AT&T	T-Mobile	Sprint Nextel	Sector
Year-to-Date Return	14.88%	5.90%	23.94%	6.17%	13.47%

Verizon has been a relative performance leader, year-to-date.

Conclusion

Verizon provides communications products and services through a variety of mediums to consumers and companies around the world. Recently, the company issued an earnings report that was below expectations. The stock has been surging higher over the last few years and is now trading at prices not seen for over a decade. Over the last four quarters, earnings and revenue figures have been on the rise which has led investors to be mostly pleased with the company. Relative to its peers and sector, Verizon has been a year-to-date performance leader. WAIT AND SEE what Verizon does in the coming weeks.