Verizon Partners Synchrony to Foray Into Financial Services

Zacks Equity Research

Verizon Communications Inc. VZ recently announced its foray into financial services market by collaborating with Synchrony Financial SYF. The partnership is likely to diversify the portfolio of both the companies and is likely to be a win-win deal with Synchrony overcoming the loss of Walmart Inc.’s WMT long-running credit card agreement and Verizon innovating new revenue stream amid increased market competition.

Based in Stamford, CT, Synchrony is one of the premier consumer-oriented financial services companies, offering a wide range of credit products through a diverse group of retailers, local merchants, manufacturers, buying groups and industry associations. With more than 80.3 million active accounts, it focuses on generating financial flexibility for its customers by offering Dual Card, co-branded credit cards, promotional financing and installment lending. Moreover, as the company is the largest provider of private label credit cards in the United States, it delivers innovative analytics, payments, loyalty and financing solutions.

Per the agreement, Synchrony will provide exclusive credit card services to Verizon, thereby gaining access to the latter’s 150 million subscriber base in the United States. The strategic tie-up with the top 10 U.S. card issuer will offer Verizon users an option to avail a new credit card with bundled features. In addition, the alliance is expected to give tough competition to T-Mobile US, Inc.’s TMUS banking service, T-Mobile Money, thereby generating a new revenue source for the telecom giant in the first half of 2020.

It is yet to be revealed as to what exactly will distinguish Verizon's co-branded credit card from the ones offered by other tech companies, including the added benefits and fine prints. Nonetheless, Verizon has launched a site to inform the customers about the initiative.

With one of the most efficient wireless networks in the United States, Verizon deploys advanced technologies to solve complex business challenges and deliver increased capacity, lower latency and faster speeds, backed by customer-focused planning, disciplined engineering and strategic investments. It intends to capitalize on the countless innovative technology solutions being developed in the IoT and telematics ecosystem across multiple industries.

Verizon expects considerable business growth in both its Wireless and Wireline businesses in 2020. The company expects healthy improvement in margins on the back of continued strong FiOS network and strategic services in the Wireline business. The company’s efforts to boost growth include improving operating and capital efficiency. In the enterprise and wholesale business, the company is changing its revenue mix toward newer growth services like cloud, security and professional services.

Verizon has long-term earnings growth expectation of 3.3%. Driven by healthy traction in the wireless business, the stock has gained 7.3% compared with the industry’s growth of 14.3% in the past year.



Verizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
 
Synchrony Financial (SYF) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
T-Mobile US, Inc. (TMUS) : Free Stock Analysis Report
 
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