.September 6, 2024 12:38 PM

KeyBanc analysts have lowered their price target for Verizon Communications (NYSE:VZ) to $44 from $46, while maintaining an Overweight rating. Concerns were raised over Verizon’s acquisition of FYBR, seen as a suboptimal capital allocation.

Despite improving key performance indicators, capital returns through buybacks may be delayed until 2027-2028, diminishing the bull case for investors. The acquisition of FYBR could dilute FCF, EPS, and increase leverage, with minimal growth enhancement.

KeyBanc suggests that buybacks at Verizon’s 11% equity FCF yield and 6.5% dividend yield may offer a higher ROIC than the FYBR acquisition. Investors could consider AT&T (T) for similar exposure at a discount with lower leverage.