Scotiabank Upgrades Verizon to Outperform, Labels Shares 'Cheap' Amid Sector Revaluation

Scotiabank has upgraded Verizon Communications Inc. (VZ) to Outperform from Hold, asserting that the stock is currently undervalued relative to its peer group and long-term cash flow potential. The firm highlighted VZ’s trailing twelve-month free cash flow of $24.1 billion and a dividend yield of 6.4%, which it views as attractive in the current market environment. The bank also noted that Verizon’s forward P/E ratio of 11.8x is below the sector average of 13.5x, reinforcing its assessment of the shares as 'cheap'. The upgrade comes amid broader market skepticism toward high-dividend stocks, yet Scotiabank maintains that Verizon's stable business model and disciplined capital allocation strategy position it well for sustained shareholder returns. The firm specifically pointed to VZ’s $5.6 billion in capital expenditures for 5G network expansion and its $10.2 billion in share buybacks over the past two fiscal years as evidence of strategic financial strength. Meanwhile, AT&T (T) remains rated Neutral, with the bank noting its higher leverage and slower subscriber growth in its wireless segment. Sempra Energy (SRE) continues to be rated Outperform, driven by its regulated utility growth and exposure to clean energy infrastructure, though the bank cautioned on near-term regulatory risks. These ratings collectively reflect a preference for asset-heavy, cash-generative utilities and telecoms with strong balance sheets. The upgrade has led to a modest 1.3% increase in VZ’s share price in early trading, with volume above 30-day average levels. Analyst upgrades typically influence short-term sentiment but rarely trigger large-scale capital repositioning unless accompanied by earnings surprises or macro shifts. Nonetheless, the move adds to a growing list of positive views on U.S. telecom equities, particularly those with resilient dividend profiles.