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U.S. telecom giant Verizon Communications Inc. (VZ - Free Report) is likely to start an online TV streaming service later this year. The company has decided to come up with dozens of channels nationwide for the new service. Management is currently negotiating with several TV network owners to secure online streaming rights. Recently, the company stated that the new service will include some innovative features to differentiate its offering from the existing products in the market.

Notably, Verizon offers fiber-optic based FiOS TV services to its residential customers. This service is similar to that of cable TV operator’s traditional video offerings. At present, the company is on the verge of carrying out test trial runs for its IPTV upgrade.

In 2015, the company launched go90, a YouTube-like streaming-video service aimed at teenagers. However, the new online streaming video service will be separate from the previous two offerings as it will compete with established low-cost streaming video services like Netflix Inc. (NFLX - Free Report) and Amazon.com Inc.’s (AMZN - Free Report) Prime video.  

Internet TV is gradually gaining market traction in the U.S. Of late, the legacy pay-TV industry in the country has been facing severe competition from online video streaming service providers. The low-cost over-the-top video streaming service has resulted in massive cord cutting that is currently threatening the pay-TV business model. Internet TV has emerged as a strong alternative to counter this competitive threat.

Last year, Verizon’s closest rival AT&T Inc. (T - Free Report) had launched its online TV streaming service - DirecTV Now. Satellite TV operator DISH Network Corp. (DISH - Free Report) offers a similar kind of product called - Sling TV. Comcast Corp. (CMCSA - Free Report) – the largest cable multi service operator in the U.S. and a media giant - is considering a strategic decision to rebrand its existing TV streaming service “Stream”, to make it available across its footprint. The new service called - Xfinity Instant TV - is expected to start in the third quarter of 2017.

Price performance of Verizon

Year to date, the stock price of Verizon has witnessed a decline of 13.45% compared with the Zacks categorized U.S National Wireless industry’s decline of 7.94% in the same time period.

Nevertheless, Verizon has a very powerful diversified business model. On the wireless front, it will start initial deployment of the upcoming 5G network in 2018. Meanwhile, it is aggressively expanding its fiber-based footprint on the wireline front. In the digital media front, Verizon has become a major contender for the lucrative online advertisement business. We believe that these are the primary reasons behind the stock currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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