Future of our stock

On 27 May SvD reported that Ericsson’s management team had since 2010 has cost shareholders 1.3 billion, of which CEO Hans Vestberg 265 million. The salaries of the telecom giant’s top executives has increased and are significantly higher than in other large listed companies. Meanwhile the stock has gone into disrepair.

Dissatisfaction with Ericsson rose on the stock market after the weak first quarter report and a poor share price performance over time. After the report, earnings estimates for 2016 turned down sharply.

The criticism had been hard on CEO Hans Vestberg who had been able to take a cash bonus of just over SEK 16 million in 2015, especially as the company had not revealed exactly what criteria is the basis for payment.

Ericsson has lost nearly a third of its market value in the past five years, while the Stockholm Stock Exchange has risen by about 30 per cent. Since Hans Vestberg was appointed CEO on 1 January 2010, the Stockholm Stock Exchange index has risen by almost 60 per cent, while Ericsson’s stock has fallen by about 5 per cent, said the SvD news report.

Jan Frykhammar takes on the role as CEO until a new CEO can be appointed, while Carl Mellander is appointed acting CFO.

Hans Vestberg leaves all assignments, effective immediately, said a press release. During his years with Ericsson Hans Vestberg held various positions in China, Sweden, Chile and Brazil.

“Hans Vestberg has led the company for seven years through significant industry and company transformation. Hans has been instrumental in building strong relationships with key customers around the world and his leadership and energy have been an inspiration to employees and leaders across Ericsson. However, in the current environment and as the company accelerates its strategy execution, the Board of Directors has decided that the time is right for a new leader to drive the next phase in Ericsson’s development,” said Chairman of the Board Leif Johansson.

As recently as on 1 July Ericsson announced a series of organizational and structural changes to strengthen strategy execution to drive growth and profitability. A new Executive Leadership Team (ELT), was then appointed, still with Hans Vestberg as CEO.

“As we move into a new phase of the company development I want to give a special recognition and thanks to the leaving ELT members. They have been instrumental in building our market leadership and setting us on our current path of change,” said Hans Vestberg, President and CEO of Ericsson.

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TipRanks
May 19, 2021·4 min read
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During a booming twelve-month period for the markets, Verizon Communications (VZ) stock has made few dramatic moves. That seems sensible, given that its main appeal is the company’s solid, stable forward dividend yield of 4.33%, not the potential for high price appreciation.

Despite its stability, some may wonder whether the company’s recent move to jettison its online media unit, which included brands such as AOL and Yahoo!, could help change the stock's growth situation.

Verizon had paid up big to acquire both businesses, to the tune of $9 billion. Now, only a few years after its mid-2010s online media splurge, the company is unloading a 90% stake in the unit to private equity giant Apollo Global Management (APO) for just $5 billion.

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Is this deal, which seems to be a case of throwing in the towel, a good thing for Verizon shares? It should be a positive move, but so far it has not been, and likely will not be, a driving factor for its stock price. (See Verizon stock analysis on TipRanks)

VZ Stock and Exit From Online Media

Much like AT&T (T), a few years ago, this internet and phone provider decided to try its hand as well at diversifying into media. Verizon shied away from acquiring “old media” properties like its rival did via its costly acquisition of Time Warner back in 2018.

Verizon did go with some “old school” names, but they were “old school” in the sense that they were brands that got their start at the dawn of the dotcom era.

In buying up AOL and Yahoo!, Verizon might have believed it could become a major player in the online advertising space. Yet, holding just 2% market share, it has not exactly beaten ad powerhouses Google (GOOGL) and Facebook (FB) at their own game.

In hindsight, it made little sense to try competing with ad-focused tech giants. By admitting defeat now, the company can shift its focus back to what it does best.

Refocus on Telecom Unit

Considering the company’s overall market capitalization of around $243 billion, its ill-fated foray into new media didn’t do much damage. The flip-side, though, is that the sale of its media division does little to help overall prospects for VZ stock.

Sure, with its need for cash in order to capitalize on 5G, the $5 billion in proceeds from the deal will come in handy. In order to keep up with AT&T and T-Mobile (TMUS), Verizon has to pay large amounts for the airwave spectrum.

Verizon is certainly facing many challenges. However, given that the company is well-established and less levered than rival AT&T, Verizon has a shot at holding the competition at bay. This bodes well for keeping results steady, which in turn will help secure its current dividend payout.

At the same time, investors looking for stocks with appreciation potential will likely look elsewhere. This likely means that the stock, after popping and dropping on the divestiture news, is not likely to shift significantly from its current price levels of around $58 per share.

What Analysts are Saying About VZ Stock

According to TipRanks, VZ stock has a Moderate Buy analyst consensus rating. Out of 13 analyst ratings, 5 rate it a Buy, 8 analysts rate it a Hold, and 0 analysts rate it a Sell.

As for price targets, the average analyst price target on VZ stock today is $61.30 per share, implying around 7.2% upside potential from current price levels. Analyst price targets range from a low of $57 per share to a high of $64 per share.

Bottom Line: Divestiture is a Net Positive, But It’s No Gamechanger

Both AT&T and Verizon entered into the media business around the same time. Interestingly, both are opting to divest these recent holdings at the same time as well. Similar to Verizon’s above-mentioned divestiture, AT&T has just announced plans to merge its media unit with Discovery (DISCA).

After spreading itself too thin, Verizon is smartly trimming down its empire at a time when even its bread-and-butter telecom unit faces challenges of its own. Competition is heating up, and the company is facing pricing pressures. Despite spending heavily to upgrade for the 5G revolution, its ability to raise prices is dubious, given its competitors' low prices.

Verizon's ability to generate enough cash flow to service the dividend is vital to its future prospects. In the grand scheme of things, the aforementioned divestiture does little to change the fortunes of VZ stock. JUST PUTTING THE INFO AT YOUR FINGERTIPS YOU CANT DOWN VOTE FACTS...

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