This stock could be a great defensive play according to Goldman Sachs analyst Brett Feldman.
Goldman Sachs added a new stock to its “Conviction Buy” list this week.
Analyst Brett Feldman added wireless provider Verizon (NYSE: VZ) to the list as he shuffled his ratings this week as he adjusted his view of the telecom sector to reflect the coronavirus pandemic.
According to Feldman, Verizon offers investors “the most attractive combination of total return and risk owing to its stable wireless business, well-covered dividend (a 4.6% yield) and strong balance sheet.”
Verizon shares have fared better than the overall market recently as investors and analysts are attracted to its stable revenue stream. Since the S&P 500 peaked on February 19, the index has sunk -25% while Verizon stock has shed just over -5%.
Feldman wrote that Verizon has “stable/growing earnings per share and free cash flow, even in an tougher economy. This is because a large majority of Verizon’s revenues come from selling wireless connectivity services to consumers and businesses in the U.S. [These] services are relatively non-discretionary and will see less of an impact from potential drops in consumer and business spending.”
“We believe Verizon’s financial performance will not be materially impacted by a short-term economic shock,” Feldman added.
Feldman isn’t the only analyst bullish on Verizon shares.
Last month, Raymond James analyst Frank Louthan IV upgraded the stock to Outperform, writing that the stock has “defensive characteristics with steady free-cash flow and more importantly lower leverage than AT&T (NYSE: T).”
“Our thesis on Verizon has been that while it has a less complicated business model, it had little upside to drive higher valuation or a meaningful catalyst,” Louthan wrote. “Given the changes in sentiment and market conditions, this no longer seems to be the appropriate way to look at the name.”