A white Verizon iPhone doesn't exist, but Verizon stock would probably still have taken a hit if it did. Image: CC iRicky We/Flickr
Verizon stock did not benefit from the company’s announcement confirming the Verizon iPhone. In fact, Verizon stock fell Tuesday shortly after the Verizon press conference. But Apple stock value, which is partially based on the iPhone, rose 6 percent in the last week driven by Verizon iPhone anticipation.
Verizon stock: buy the rumor, sell the news
Verizon stock was down 2 percent early Tuesday afternoon following the Verizon iPhone announcement. Investment analysts expect Apple to benefit at Verizon’s expense and the market reflects that assumption. They have AT&T’s track record with the iPhone to go on. AT&T stock is down 20 percent from Jan. 9, 2007, when it became the exclusive carrier for the iPhone. People would get a loan to buy Verizon stock when the buzz about a Verizon iPhone started intensifying in October. Verizon shares have risen about 7 percent since then. The slump in Verizon shares was described by the Wall street Journal as a “buy the rumor, sell the news” investor mentality.
The iPhone effect on Verizon earnings
Verizon stock may continue to decline as analysts expect the iPhone to dent Verizon’s earnings in 2011. Apple is notorious for using the immense popularity of the iPhone to pressure its vendors for the best deal. Verizon is also heavily subsidizing the iPhone to lure a maximum amount of customers as quickly as possible. The Verizon iPhone 4 will sell at a lower price than any other iPhone. With a two-year service agreement, the 16-gigabyte model goes for just $199, and Verizon customers will pay $299 for the 32-gigabyte model. An analyst told CNBC that Verizon is shelling out about a $400 dollar subsidy for every iPhone it sells.
Apple stock: the sky’s the limit
Apple is the true winner when it comes to the Verizon iPhone. Apple stock depends heavily on iPhone market share. Verizon iPhone rumors in the last quarter of 2010 drove Apple stock up 19 percent. The iPhone’s share of the global smartphone market increased from 2 percent in 2009 to 3 percent in 2010. The Verizon iPhone could boost Apple’s global smartphone market share to hit 12 percent in the next few years. Even borrowing money to buy Apple stock now is a good debt. The Trefis Team at Forbes estimates that the price of Apple shares could increase another 25 percent from its current market price of about $340.
