Samsung (OTC: SSNLF) won a lucrative $6.6 billion contract with Verizon (NYSE: VZ) after a stiff competition between several companies. The contract establishes Samsung as the provider for equipment for Verizon's 5G network.
The contract was signed on Friday, according to Bloomberg. Samsung was picked over industry leaders that had previously carved out a considerable market share of the nascent 5G market. Nokia (NYSE: NOK), Ericsson (NASDAQ: ETIC), and Huawei were snubbed for Samsung by Verizon.
"With this latest long-term strategic contract, we will continue to push the boundaries of 5G innovation to enhance mobile experiences for Verizon's customers," said Samsung in a statement.
Nokia had previously been the equipment supplier for Verizon, though it would appear that, for whatever reason, Verizon was seeking another supplier for its 5G network. Rumors began to circulate in July of the potential shakeup by Verizon. It was another blow for the Finnish firm, which has been stuck in a rut.
Verizon's stock didn't seem to react much to the news, spending most of the last few days fluctuating between $59-60. Verizon opened trading on Friday with a share price of $60.48, but as of market close on Tuesday, the company was down .9% at $59.96. Some analysts didn't seem to change their tune too much, with six Hold and five Buy ratings being maintained by 11 analysts. Others rose their price targets, with UBS Group (NYSE: UBS) raising its target to $60.
Samsung, however, seemed to garner much more enthusiasm. On Friday, Samsung stock was trading at ₩56,100 ($47.15) and was up 4.7% at market close on Tuesday at ₩58,700 ($49.33). Analysts seem to feel favorable towards Samsung, with a median price target of ₩72,000 ($60.51).
"We continue to employ a residual income (RI) valuation model, cross-checked against P/BV analysis. At our W70,000 price target, the 2021 P/B multiple would be 1.4x, which is in line with its long-term mid-cycle valuation level of 1.4x. Our terminal growth rate assumption is 5%, and we assume an 11.5% cost of equity, based on a beta of 1.0," said Shawn Kim of Morgan Stanley (NYSE: MS).