Verizon Communications Inc. (VZ): Our Calculation of Intrinsic Value

Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Verizon Communications Inc. (VZ).

Profile

Verizon Communications Inc. is one of the leading telecommunications companies in the United States, providing wireless, broadband, and enterprise services. Known for its stable cash flows and consistent dividend payments, Verizon continues to maintain a strong market position while navigating a competitive telecom landscape and heavy capital expenditure requirements.

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DCF Analysis

Inputs
Discount Rate: 10%
Terminal Growth Rate: 3%
WACC: 10%

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Forecasted Free Cash Flows (in billions)
2025: $20.0 → PV: $18.18
2026: $21.0 → PV: $17.36
2027: $22.0 → PV: $16.54
2028: $23.0 → PV: $15.77
2029: $24.0 → PV: $15.04

Total Present Value of FCFs: $82.89B

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Terminal Value Calculation
Using the perpetuity growth model:

TV = (24.0 × 1.03) / (0.10 − 0.03) = 353.14B

Present Value of Terminal Value = $221.80B

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Enterprise Value
Enterprise Value = 82.89B + 221.80B = 304.69B

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Net Debt
Cash: $4.19B
Total Debt: $168.36B
Net Debt: $164.17B

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Equity Value & Per-Share Value
Equity Value = 304.69B − 164.17B = 140.52B

Shares Outstanding: 4.20B
Intrinsic Value per Share = 140.52 ÷ 4.20 = $33.46

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Conclusion
DCF Value: $33.46
Current Price: $43.80
Margin of Safety: –24%

Verizon generates reliable free cash flows and maintains its leading position in the telecom sector. However, at current levels, the stock trades above our conservative intrinsic value estimate, suggesting limited upside based on this DCF model.