Verizon Suffers from Wall Street's Woes

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On that note, the company announced July 28 that it has officially launched its long-awaited FiOS TV service in New York City. The Big Apple franchise covers more than 3 million households. Bank of America analyst Barden says before the New York launch, Verizon's TV footprint only covered about 7 million households. "The opportunity is monstrous compared to what they've built at this time," he says. "Based on my experience with Time Warner, I cannot wait to try it out."

Wireless, though, is still the company's growth engine. The division grew its revenues 11.8% to $12.1 billion, while reporting operating income margins of 28.6%, its highest ever. In the quarter, the company added 1.5 million customers—the highest tally in the U.S. industry. Verizon also scored another first by reporting that its churn rate, or the percent of customers that cancel their service, had dropped to 1.12%, a record low for the company that already boasts the industry's most loyal customer base.

"We do think there is more stability in these businesses than the stock market is giving them credit for," says Todd Rosenbluth, an analyst with Standard & Poor's (MHP). "There's pressure but there's more positive offsets." Currently, Verizon trades at a price-earnings multiple of around 11 times next year's earnings. But Rosenbluth and other bullish analysts believe Verizon deserves a price-earnings multiple of around 13 to 14 based on its stability and growth potential.

To keep its wireless engine churning, Verizon is counting on a combination of investments and mergers and acquisitions. On June 5, Verizon Communications agreed to buy Alltel for about $28.1 billion, including the assumption of debt. The deal would allow Verizon to surpass AT&T as the largest U.S. cellular telephone operator. If the deal is approved by the end of this year, as Verizon hopes, it will give Verizon ample opportunities for revenue growth and cost-cutting. Further down the road in 2010, Verizon hopes to keep its industry lead by building a fourth-generation wireless network with the spectrum it purchased in a government auction earlier this year.

"We feel good about where we are," said Strigl. "We believe we are positioned to continue to move in the right direction."

Ante is an associate editor for BusinessWeek.