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Verizon Communications Inc. (VZ) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Verizon Communications Inc. (VZ)

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Intrinsic Value (DCF)

Current$39.01
→
Intrinsic$48.95
+25%
$20.14$48.95$106.32
Market implies 5% growth for 5 years
VZ shows 25% potential upside using 8% growth — reasonable if fundamentals hold.
At $39, the market prices in only 5% growth — below historical 8%, suggesting low expectations.
Range: Bear $20 → Bull $106. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →4%6%8%10%
8%$68$78$89$100
10%$35$42$49$57
12%$18$23$28$33
14%$7$11$15$19

Bull Case

  • Bull case ($106) offers 173% upside at 10% growth, 8% discount
  • 20% margin of safety vs. base case estimate
  • Market-implied growth (5%) ≤ historical CAGR (8%)

Bear Case

  • Bear case ($20) implies 48% downside at 6% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$20.44B
Year 2$22.07B
Year 3$23.84B
Year 4$25.74B
Year 5$27.80B
Terminal$440.56B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$18.92BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Regulated returns may affect assumptions. See FAQ below for full methodology.

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Frequently Asked Questions

Is VZ stock undervalued or overvalued?
🟢 UNDERVALUED

VZ trades at $39.01 vs. our DCF-derived intrinsic value of $48.95, implying +21% upside. At a 9.5% WACC and 8.0% projected FCF growth, the market appears to be underpricing the present value of VZ's future cash flows. The bear case ($23.63) still suggests upside, providing margin of safety.

What is VZ's intrinsic value?

Using a 5-year DCF model: Base FCF of $18.92B, projected at 8.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $164.16B net debt and dividing by 4.22B shares: Bear $23.63 | Base $48.95 | Bull $83.99. Current price $39.01 implies +21% to base case.

How is VZ's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($370.65B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 19.6x.