Verizon iPhone predicted to earn Apple 'respect' on Wall Street

Posted:
in iPhone edited January 2014
The anticipated arrival of the iPhone on Verizon's network in the U.S. will not only increase sales of Apple's smartphone, but will also earn the company more respect on Wall Street, one prominent analyst believes.



Yair Reiner with Oppenheimer said in a note to investors on Monday that he believes the market dislikes Apple because Google's Android mobile operating system is gaining momentum. He said investors are likely worried about the sustainability of the price premium of Apple's iPhone as handsets running Android become more prevalent.



"If so, the more lasting consequence of an Apple-Verizon deal won't be the number of incremental iPhones sold, but the scale of competition between iPhone and Android could tip sharply in Apple's favor," he wrote.



"If so, Apple's earnings won't just rise from the additional Verizon units -- they'll finally get some respect."



Reiner noted that Wall Street investors typically grant companies with 70 percent earnings per share growth a "premium valuation." But AAPL stock is valued at just 14 times its EPS, which is equivalent to the Standard & Poor's average.



"The main risk to Apple is that Android, by creating an equally compelling experience, could make iOS less sticky and restore some bargaining leverage to carriers," he wrote. "There's no better way for Apple to blunt this threat than by making headway at Verizon, whose patronage has been critical to Android's success with both consumers and developers."







The analyst also questioned why Apple and Verizon would finally make a deal now, if the rumors prove true. Numerous mainstream media outlets have independently reported that the iPhone will debut on Verizon in early 2011.



Reiner speculated that Apple has been motivated by a desire to slow Android, though he admitted Verizon's inspiration is "less clear." He said perhaps Apple offered an exclusive long-term evolution 4G phone to the carrier, or in an "unlikely" move, perhaps Apple "caved on price."



"For Apple, having access to Verizon?s network would constitute a significant strategic coup for which it may be willing to make some sacrifices," Reiner wrote. "But given the near-term advantages the iPhone could confer on Verizon, we think Apple has the leverage to conclude a deal that significantly advances its two key, intertwined goals (preserving the iPhone?s price premium and trimming Android?s sails) without giving up much."



To kick off 2011, Oppenheimer has increased its fiscal year revenue and EPS estimates for AAPL to $86.4 billion and $19.01, respectively, to reflect the anticipated debut of the iPhone on Verizon's network. While Reiner believes it could happen in the first half of 2011, the firm has conservatively assumed the handset will be introduced with the fifth-generation iPhone in the third calendar quarter of the year.
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Comments

  • Reply 1 of 79
    mstonemstone Posts: 11,510member
    I hope it is LTE only. That would make it the must have geek device.
  • Reply 2 of 79
    srangersranger Posts: 469member
    So I guess a stock climbing to over $300 per share in one of the worst economic times ever was not enough to earn their respect??????
  • Reply 3 of 79
    So, if Apple's iPhone comes to Verizon this year, will Apple's "magic" rub off on Verizon's share price?
  • Reply 4 of 79
    MacProMacPro Posts: 17,833member
    Quote:
    Originally Posted by sranger View Post


    So I guess a stock climbing to over $300 per share in one of the worst economic times ever was not enough to earn their respect??????



    My thoughts exactly! What a moronic statement eh?
  • Reply 5 of 79
    Quote:
    Originally Posted by sranger View Post


    So I guess a stock climbing to over $300 per share in one of the worst economic times ever was not enough to earn their respect??????



    The price per share isn't meaningful in the way you state it. It's all about earnings multiples, which it's correctly stated here are very low for a company experiencing such rapid earnings growth. BTW, the multiple stated is forward PE, which means it is based on consensus estimates of future earnings. The truth is, the markets have always questioned Apple's model of doing business which it seems is always anticipated to be on the verge of unraveling. So expecting anything to change on that front due simply to a Verizon iPhone seems like wishful thinking to me.
  • Reply 6 of 79
    so can someone please explain why they won't just release iPhones for every carrier in the US?
  • Reply 7 of 79
    Quote:
    Originally Posted by Gordon Werner View Post


    so can someone please explain why they won't just release iPhones for every carrier in the US?



    AT&T pays Apple more per iPhone since they are the exclusive carrier. Yes, apple could sell more units on multiple carriers, but for the past few years they (Apple) felt the higher payments from AT&T were a better deal than higher volumes (at lower prices) across multiple carriers. Now that their time with AT&T is likely coming to an end, Apple may seek another "exclusive" deal which will thus get a carrier to pay more. The deal mentioned in this article (having Verizon be the exclusive carrier of a 4G iPhone) certainly makes sense. We'll see how things pan out.
  • Reply 8 of 79
    I think Apple's reasons are simple:



    1. It makes a lot of money

    2. It creates critical competition for Android, removes their Telco shelter

    3. Positions themselves with Verizon, one of the least cell phone and customer friendly vendors [mandatory apps, mandatory search, mandatory screens, and gatekeeper for apps and app stores]. We forget Verizon and Android/Google are trying to turn the clock back pre-iPhone and control [thereby kill] customer environment.



    This last is really important, curated with open web is Apple's story. Open but taxed and managed by telcos is Verizon [and now Google as well] view.



    For Verizon



    1. They are loosing to AT&T on growth [even with reported poorer service in some areas]

    2. Android steep discounts and heavy advertizing budgets are expensive

    3. If rumors are true Android has peaked for Verizon and dropping off.

    4. They want a piece of iOS beyond iPhone as well, MiFi or iPod Touches and CDMA for iPad

    5. Their 4G does not have the panche they need w/o iPhone 5G that will prob support AT&T 4G



    Finally, regarding Wall street analysts these were the nay-sayers on iPod 2003, Apple Retail, iPhone 2007, iPad 2010, etc. who have no clue. Apple sold 14 Million iPhones has 3 month backlogs in China, Apple is limited by production capability not competition from Android.



    The issue for investors is Apple's ability to meet exploding demand, can it get its manufacturing up to 10 million iPhones and 5+million iPads reliably over the next few months while undergoing model changes for iPhone 4G to 5G [and perhaps a CDMA version] and iPad1 to IPad2?



    Finally, the biggest technology uncertainty remains migration to 4G [and there are at least 3 flavors of 4G, LTE, Wimax, and upgrade 3G [that standards group says are all 4G!]. Add to this what frequencies etc. that the radios need to accommodate [ATT buying new spectrm] in zero footprint package with long battery life and here there are enormous challenges and risks, antenna-gate anyone?
  • Reply 9 of 79
    desarcdesarc Posts: 642member
    Quote:
    Originally Posted by Dr Millmoss View Post


    The price per share isn't meaningful in the way you state it. It's all about earnings multiples...



    thanks for an educated post. there are too many "that guy is stupid" posts from people who don't know what they're talking about.
  • Reply 10 of 79
    Yeah... Apple has been such a failure on Wall Street. If they rounded up all executives at investment firms and major banks and locked them up, America would be so much better off.
  • Reply 11 of 79
    Quote:
    Originally Posted by AppleStud View Post


    AT&T pays Apple more per iPhone since they are the exclusive carrier. Yes, apple could sell more units on multiple carriers, but for the past few years they (Apple) felt the higher payments from AT&T were a better deal than higher volumes (at lower prices) across multiple carriers. Now that their time with AT&T is likely coming to an end, Apple may seek another "exclusive" deal which will thus get a carrier to pay more. The deal mentioned in this article (having Verizon be the exclusive carrier of a 4G iPhone) certainly makes sense. We'll see how things pan out.



    Actually, the key thing was control and leverage. Apple made demands about (for example) visual voice mail and control of the handset in return for AT&T exclusivity. Carriers in the US have tremendous power, and Apple had to offer something big in trade to break that.
  • Reply 12 of 79
    sheffsheff Posts: 1,407member
    I think it would be very bad if we don't hear about a Verizon iPhone some time soon. I think it would not change Apple's position much if we do hear about it. ATT and Apple both milked their exclusive partnership long enough.



    I think it is time for apple to focus on maintaining market share by selling $99 iPhone N-1 (previous gen) and increasing the pace of updates to the iPhone N (current gen). Android has been moving very fast, and while they have slowed a bit according to the news, I think it would be wise for apple to do refreshes a little more often (iPhone N.5 for Verizon and iPhone N for ATT for example).
  • Reply 13 of 79
    In other news, Tom Brady hopes to finally earn some respect by winning his 4th championship this year.
  • Reply 14 of 79
    tbelltbell Posts: 3,146member
    People forget history. Apple wanted to enter the phone market. It never produced a phone before, and like on the Mac, it wanted to control the user experience. Cellular companies to that time had been controlling the user experience because they retained control over the software installed on the phones, the way the phones were sold, and the servicing of those phones. Innovation was stagnant. Apple couldn't convince any of the major cell service providers to let it retain control of the user experience and give it a deal without a phone actually being produced.



    AT&T just bought Cingular and was hungry to take on Verizon. Steve Jobs knew AT&T's Chairman of the Board personally. AT&T was willing to take a chance on Apple's unproduced phone relying on Apple's past successes. Further, it was willing to give up control over the user experience provided Apple would give it an exclusive long term contract.



    The contract today acts as a ball and chain against Apple's growth, but at the time it was necessary to bring the iPhone to market. Without Apple taking that sacrifice not only would the iPhone not be what it is today, but Android wouldn't be nearly as big today because the number one reason it has gained traction is because Apple was forced into a long term exclusive deal and its success has made Apple and AT&T's competitors look for a savior in the form of Google.



    I suspect Apple, however, will do another semi-exlcusive deal with Verizon in that T-Mobile still will not be allowed to play for awhile.



    Quote:
    Originally Posted by AppleStud View Post


    AT&T pays Apple more per iPhone since they are the exclusive carrier. Yes, apple could sell more units on multiple carriers, but for the past few years they (Apple) felt the higher payments from AT&T were a better deal than higher volumes (at lower prices) across multiple carriers. Now that their time with AT&T is likely coming to an end, Apple may seek another "exclusive" deal which will thus get a carrier to pay more. The deal mentioned in this article (having Verizon be the exclusive carrier of a 4G iPhone) certainly makes sense. We'll see how things pan out.



  • Reply 15 of 79
    The real message here is don't use Oppenheimer funds if this guy is an analyst for them
  • Reply 16 of 79
    $50 Billion in cash on hand, a stock price over $300/share, and being the highest valued tech company in the world isn't enough to earn Apple 'respect?' No wonder we went through an economic meltdown - Wall Street is staffed by morons.



    That's like saying that another World Series Championship would make the New York Yankees a respected baseball franchise.
  • Reply 17 of 79
    Apple will never have the "respect" of droid suits because Apple is creative, different, and that scares the suits. Always has, always will. Smell the fear.
  • Reply 18 of 79
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by TBell View Post


    AT&T just bought Cingular and was hungry to take on Verizon. Steve Jobs knew AT&T's Chairman of the Board personally. AT&T was willing to take a chance on Apple's unproduced phone relying on Apple's past successes. Further, it was willing to give up control over the user experience provided Apple would give it an exclusive long term contract.



    All good points, but a minor correction: It was Cingular Apple partnered with and Cingular who bought AT&T.



    Quote:

    The contract today acts as a ball and chain against Apple's growth, but at the time it was necessary to bring the iPhone to market. Without Apple taking that sacrifice not only would the iPhone not be what it is today, but Android wouldn't be nearly as big today because the number one reason it has gained traction is because Apple was forced into a long term exclusive deal and its success has made Apple and AT&T's competitors look for a savior in the form of Google.



    Can?t disagree with that but I?d add that the current excessive demand has held back iPhone sales more. This however, will likely not be an issue as the new factory is slated to come online shortly. Hopefully they have the needed components to meet this year?s demand.



    Quote:

    I suspect Apple, however, will do another semi-exlcusive deal with Verizon in that T-Mobile still will not be allowed to play for awhile.



    Sprint might be the odd man out here. T-Mobile might be a pretty simple add with Apple?s 4 generations of GSM-based handsets. If we see an AWS (1700MHZ) band in the next iPad or iPhone from the FCC I think it?s a good sign that T-Mobile USA will be coming aboard.
  • Reply 19 of 79
    srangersranger Posts: 469member
    Quote:
    Originally Posted by MJBauer View Post


    The real message here is don't use Oppenheimer funds if this guy is an analyst for them



    Well said...
  • Reply 20 of 79
    Quote:
    Originally Posted by rdjlexky View Post


    $50 Billion in cash on hand, a stock price over $300/share, and being the highest valued tech company in the world isn't enough to earn Apple 'respect?' No wonder we went through an economic meltdown - Wall Street is staffed by morons.



    That's like saying that another World Series Championship would make the New York Yankees a respected baseball franchise.



    A very poor analogy. He is saying that AAPL would be trading much higher if the markets assigned a multiple to the stock similar to what is typically given to companies with high earnings growth rates. He is entirely correct. The real question is whether a Verizon iPhone will change what has been true throughout most of Apple's period of major growth.
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