The Aftermath of Verizon’s Victory for the iPhone: A Look Six Months Later

June 8, 2011 | 0 comment

In the aftermath of Verizon (VZ) finally getting access to Apple’s (AAPL) iPhone the debate still rages over which one of these stocks deserves your investment dollars. Since Apple’s much anticipated announcement on January 11th of this year- the one ending the exclusivity with AT&T (T), AT&T’s stock price had increased approximately 7.1% compared to Verizon’s stock staying virtually flat. Verizon was up, dare I say, two cents during the same time frame. So why is there such a disconnect in stock prices? Both companies offer a similar yield of around 5.6%. The dividend payout rates for AT&T and Verizon are 48% compared to a whopping 153% respectively. Both companies have ample cash flow and cash on hand to pay their dividends. However, Verizon has over $5 in cash per share and may be poised to make a better strategic play than AT&T’s recent purchase of T-Mobile. AT&T’s decision to buy another carrier before fixing its own network issues is reason for concern.

Verizon offers a much better growth story. FIOS has been a huge success taking away market share from Comcast (CMCSA), Direct TV (DTV), and Dish Network (DISH). But the question still remains: How long will it take for Verizon to recover their infrastructure costs and by then what will the new media be? The Verizon iPhone is said to not drop nearly the amount of calls as AT&T’s iPhone and with better clarity- but will this be the case when Verizon integrates simultaneous usage of data with voice services? And then what will happen to the quality of service?Time will tell on this one….

Article written by Sean Farhy on June 8, 2011

Data used to compare the stock returns of AT&T and Verizon were end of day January 10th and end of day June 7th 2011.

Richard Rhodes is the founder of Rhodes Capital Management, Rhodes Trading Group, and The Rhodes Report a macroeconomic and stock trading newsletter. The Rhodes Report seeks an absolute return through a long short strategy that trades equities, ETFs, and inverse ETFs that offer the greatest potential for positive portfolio returns in both bull and bear markets.

This is not a solicitation and any information on Rhodes Capital Management (RCM), The Rhodes Blog, or any other RCM affiliated website should not be construed as financial advice. RCM is not responsible for and does not guarantee any information associated with this or any other RCM affiliated website. All information disseminated by RCM are the opinions of RCM and any questions regarding any information disseminated by RCM should be addresses by your own investment advisor.