Verizon and AST SpaceMobile recently announced a partnership to deliver satellite-based cellular broadband across the continental United States by 2026. While the news caused AST SpaceMobile's stock (ASTS) to surge, Verizon's stock (VZ) experienced a decline, creating an unusual and historically significant trading pattern that market analysts are now closely watching.
This rare signal, identified through an analysis of historical price movements, suggests a potential for short-term upside in VZ stock, contrasting with its recent performance and standard market valuation models.
Key Takeaways
- Verizon and AST SpaceMobile have partnered to provide satellite-to-cell service in the U.S. by 2026.
- Following the announcement, ASTS stock increased by nearly 39% in a week, while VZ stock declined over 5%.
- Verizon's stock has entered a rare historical pattern, known as a "7-3-D" sequence, which has occurred less than 0.5% of the time since 2009.
- Historical data from the few times this pattern appeared suggests a potential for VZ stock to rise in the subsequent weeks.
Partnership Details and Market Reaction
Telecom giant Verizon has entered into a definitive commercial agreement with AST SpaceMobile, a company specializing in satellite design and manufacturing. The collaboration aims to provide a space-based cellular broadband network directly to standard mobile phones.
The goal is to eliminate cellular dead zones and provide connectivity across the continental U.S., with service expected to launch by 2026. This move positions both companies to compete in the growing direct-to-device satellite communications market.
Contrasting Stock Performance
The market's reaction to the partnership announcement was sharply divided. AST SpaceMobile (ASTS) saw its stock price climb significantly. On the day of the disclosure, ASTS gained 8.63%, and over the trailing week, its value increased by nearly 39%.
In contrast, Verizon (VZ) did not receive the same investor enthusiasm. The company's stock slipped slightly on the day of the news and recorded a decline of more than 5% over the five subsequent trading sessions. This divergence has created an interesting scenario for market analysts, particularly those focused on options trading.
Understanding Direct-to-Device Technology
Direct-to-device (D2D) satellite communication allows standard smartphones to connect directly to low-Earth orbit (LEO) satellites without special hardware. This technology promises to provide basic connectivity for texting, voice calls, and low-speed data in remote areas where traditional cell towers are absent. Companies like SpaceX (Starlink) and Apple have also entered this field, signaling a major technological shift in global communications.
Analyzing Verizon's Unusual Market Behavior
While the surge in ASTS stock followed a predictable pattern of investor excitement over a new growth opportunity, the behavior of VZ stock has been described as unusual. This has led analysts to look beyond standard valuation models to understand its potential future movements.
Limitations of Standard Options Pricing
The most common framework for pricing options is the Black-Scholes-Merton (BSM) model. This model calculates a theoretical fair value for a derivative contract based on factors like the underlying asset's price, time to expiration, and implied volatility.
However, the BSM model produces a symmetrical price forecast. For example, based on market data, it might project that VZ stock will trade between $39.17 and $43.47 by a specific expiration date. The model does not, however, indicate whether the price is more likely to move toward the upper or lower end of that range. It assumes the probability of either outcome is equal.
What is Implied Volatility?
Implied volatility (IV) is a key metric in options pricing. It represents the market's forecast of a likely movement in a security's price. High IV suggests the market expects significant price swings, leading to more expensive options contracts. Low IV indicates expectations of price stability.
A Deeper Look at Historical Price Patterns
To gain more directional insight, some analysts turn to empirical models that study historical price action. This approach, sometimes compared to Markovian theory, converts price movements into discrete behavioral states to identify recurring patterns.
By applying this methodology to Verizon's stock, a highly unusual sequence has been identified. The stock recently completed a pattern of seven up weeks and three down weeks while posting a net negative return over that entire period. This specific sequence is referred to as a "7-3-D" profile.
The Rarity of the 7-3-D Signal
The 7-3-D sequence is extraordinarily rare for Verizon's stock. An analysis of rolling ten-week periods since January 2009 reveals that this pattern has only occurred four times out of a total of 856 possible sequences. This represents an occurrence rate of less than 0.5%.
Statistical Significance
- Total Sequences Analyzed: 856 (since Jan 2009)
- 7-3-D Occurrences: 4
- Frequency: Less than 0.47%
Due to the extremely small sample size, any conclusions are inferential rather than statistically proven. However, the pattern's rarity makes it a point of interest for traders looking for non-obvious signals.
Potential Implications for Verizon Stock
While the limited data prevents a definitive scientific forecast, the historical outcomes following the 7-3-D pattern are notable. In the few instances this setup has appeared since 2009, VZ stock has tended to perform strongly in the subsequent weeks.
Based on this limited historical data, the median price outcome peaked approximately six weeks after the pattern was confirmed. This observation suggests that, contrary to its recent downward trend, VZ stock may be more likely to move toward the upper end of its projected options pricing range in the near term.
For example, if the stock's price was anchored at $41.32, the historical median target based on this pattern projects a rise to approximately $43.80 by the sixth week. This potential outcome is particularly interesting because current options market pricing reflects low optimism for Verizon, making certain bullish strategies relatively inexpensive for speculative traders.
"The argument favoring VZ stock is inferred rather than scientifically calculated. The sample size is simply too small. However, what’s intriguing is that of the few times that this unique setup flashed, VZ has stormed higher."
This analysis suggests that despite the lack of immediate positive reaction to the AST SpaceMobile partnership, an underlying historical pattern indicates a potential for a short-term rebound. Traders may view this as a counterintuitive opportunity, betting against the recent negative sentiment based on a rare quantitative signal.
