Shares of Verizon Communications Inc. (VZ) traded up 1.6% on Monday on a bullish note from a team of analysts who expect the stock to outperform the market in 2018. Closing up at $48.66, VZ has lagged the broader market year-to-date (YTD), down about 8.1% compared to the S&P 500's roughly flat run over the same period. 

On Monday, a team of analysts at Barclays upgraded shares of the telecommunications giant to overweight from equal weight, expecting the company to start to appease investors by the second half of 2018. Analyst Amir Rozwadowski wrote that “concerns about the carrier's ability to reignite service revenue growth should start to subside as management delivers upon its expectation for year-over-year growth by the middle of the year.”

He expects VZ share to gain more than 16% over 12 months from Monday close to reach $56. 

Current Valuation 'Overly Discounts' Positives

"Current valuation levels seem to overly discount any number of factors that could improve its earnings trajectory as well as penalize the company for expected increased 5G investments despite the fact that the technology is working better than expected," wrote the Barclays analyst.

While Rozwadowski noted that Verizon and its peers in the wireless space have struggled over the most recent 12 months due to fears regarding a deceleration in subscriber fee growth and new competition from cable companies, he argues that VZ is the cheapest among the group. He noted that the stock is trading at 10.4 times consensus 2019 earnings, near the low end of its valuation range for the last 12 months. The group took another hit last week, as the U.S. Justice Department requested information from all four major wireless carriers as part of an antitrust investigation. 

Q1 Earnings Above Expectations

Verizon shares continue to gain Tuesday, up 3.3% in pre-market as the Street applauds first-quarter results that beat consensus estimates. Earnings of $1.17 per share on revenue of $31.78 billion compared to analysts' expectations for earnings per share (EPS) of $1.10 on $31.25 billion in revenue, according to Thomson Reuters. A 23% YOY growth in earnings and a near 7% jump in sales over last year was attributed to "solid performance in the wireless business," which saw revenue gain 4.7% over Q1 2017 to $21.9 billion. Net losses in connected phones and tablets were offset by a gain of 359,000 on other connected devices such as wearables. As for net additions of retail postpaid connections, representing the amount of customers locked into a contract, Verizon swung back from a decline of 307,000 in the year-ago quarter to an increase of 1.2 million in the most recent quarter. (See also: 5G: Why Traditional Cable Could Beat Verizon, AT&T.)

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