Frontier Communications vs. Verizon Stock

If you’re looking to invest in the cable industry, Frontier Communications [NASDAQ: FTR] and Verizon [NYSE: VZ] are two intriguing options, but which one is the better choice?

Comparing Frontier Communications [NASDAQ: FTR] and Verizon [NYSE: VZ] is especially interesting because the two companies have done business in the past.

In 2009, Frontier agreed to purchase Verizon’s landline assets in 13 different U.S. states for $8.6 billion.

Six years later in 2015, Frontier Communications [NASDAQ: FTR] also agreed to purchase Verizon’s landline assets in three more states: California, Florida, and Texas.

But the question of Verizon vs Frontier Communications stock needs some further investigative analysis to uncover the winner, let’s dive in.

The Pros and Cons of Investing in Cable Companies

Perhaps the biggest concern about investing in cable companies is the rise of on-demand streaming services such as Netflix [NASDAQ: NFLX], Amazon Prime Video [NASDAQ: AMZN], Hulu, and the upcoming Disney+.

According to a 2018 estimate by research firm eMarketer, 33 million people in the U.S. are “cord-cutters” who have canceled their paid TV services without resubscribing. Many of these customers prefer to use streaming platforms to watch films and TV shows.

The concerns about the growth of cord-cutting are so great that some industry analysts are proclaiming “the death of cable TV.”

While it’s hard to deny that traditional cable is currently on a downward trajectory, rumors of the “death of cable” are largely exaggerated. The good news is that most cable companies are sufficiently diversified to survive the loss of cable customers by offering other services such as Internet and cell phone plans.

For example, in Q4 2018 Charter Communications lost 36,000 residential video customers, but still managed to increase video revenues thanks to annual rate hikes and the end of many customers’ promotional offers. In addition, Charter also gained more than 1 million broadband users during 2018.

Companies like Dish Network [NASDAQ: DISH] and AT&T [NYSE: T] are also responding to changing consumer demands by offering streaming services such as Sling and DirecTV Now, respectively.

In general, there’s little reason to suspect that cable companies that are agile and willing to adapt to a changing market will be on the decline in the near future.

Is Frontier Communications Stock a Buy?

Frontier Communications [NASDAQ: FTR]s is the 11th largest provider of pay television in the U.S., and also offers broadband Internet and computer technical support services.

Originally founded in 1935, the company is headquartered in Norwalk, Connecticut. Daniel J. McCarthy has served as Frontier’s CEO since 2015.

Unfortunately, Frontier shares have been on a slow decline for a long time. The stock hit its peak around $125 in February 2015, but has been below $2 since May 2019.

Although other cable companies have been able to compensate for the loss of pay TV subscribers, Frontier Communications [NASDAQ: FTR] is not one of them. Frontier’s broadband Internet customers have also shrunk from 3.95 million in Q4 2017 to 3.75 million one year later.

Without finding a way to turn around these trends and put a stop to the bleeding, Frontier Communications [NASDAQ: FTR] faces an uncertain future. Although the company has managed to survive thus far with some financial sleight of hand, the prospects for growth in the near future look remote.

Should You Invest in Verizon Stock?

The fate of Verizon stock, on the other hand, appears much brighter when compared with Frontier Communications [NASDAQ: FTR].

Verizon [NYSE: VZ] is a telecommunications conglomerate with a number of products and services, including cable television and broadband Internet.

Most notably, Verizon’s subsidiary Verizon Wireless is the largest provider of wireless communications in the U.S. The company is headquartered in New York City and has employed Hans Vestberg as its CEO since 2018.

The Verizon stock price graph appears quite jagged, with a great deal of motion but relatively little growth. In the past 5 years, Verizon shares have oscillated between a low of $42 and a high of $60; however, the stock is currently flat for 2019.

Fortunately, Verizon [NYSE: VZ] has been able to make up for its losses in cable subscribers by focusing on its wireless business. In Q4 2018, for example, Verizon added a net 1.2 million new users.

Frontier Communications vs. Verizon Stock: The Bottom Line

If you’re deciding only between Frontier Communications [NASDAQ: FTR] and Verizon stock for your next investment, the choice is clear: Verizon shares are far more likely to grow in the foreseeable future.

Shares of Frontier stock have been on a quiet yet predictable decline, both year-to-date and over the past several years. With no plan in place for turning the business around, it’s hard to see how Frontier shares could grow significantly in the short or medium term.

Verizon’s business is much more diversified, which is a good sign for future growth. Despite competition from other wireless providers such as Sprint and T-Mobile, Verizon [NYSE: VZ] has shown the capability to innovate and remain a viable player in the telecommunications space.

Of course, if you’re looking to invest in the cable industry in general, there are other appealing stocks that may be of interest: AT&T [NYSE: T], Dish Network [NASDAQ: DISH], and Charter Communications [NASDAQ: CHTR], just to name a few.

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.