GO
Loading...

Halftime: Verizon iPhone To Drag Down Verizon Stock 10%?

You’d think that after months of speculation, the introductionof the iPhone on the Verizon network would send the Street jumping for joy.

No more dropped calls like on AT&T, right? And it opens up the corporate smartphone market, right?

But noboyd's jumping - at least not for Verizon's stock. It's down in the wake of the announcement.

What gives?

Technical analysts point to the chart of AT&T since they were named the exclusive carrier of the iPhone back on January 9th, 2007 - shares are down almost 20% since then.

And investors who look at fundamentals are saying the iPhone deal could actually drag down Verizon earnings. That’s right, drag them down – despite expectations that the gadget s could win between 2 to 5 million customers away from rival AT&T.

What must you know? And how should you trade?

Instant Insights with the Fast Money traders

Oppneheimer analyst Timothy Horan tells us the new iPhone is no good for service providers, period. Of course it’s a negative for AT&T simply because they lose exclusivity but he also thinks it’s a negative catalyst for Verizon because, ”there are very high subsidies in the iPhone,” he says, “and that could impact Verizon’s earnings by as much as 10% this year.”

Based on the just announced pricing of $199 for a 16-gigabyte model or $299 for the 32-gigabyte model (with a two-year agreement) Horan thinks there's about a $400 subsidy.

"As the Street crunches the numbers earning could be revised down 5-10%," he says.

And that's not all.

Considering the run the stock's had since October he says share price could follow the earnings revisions - lower. "Probably down between 5-10%," says Horan.

Joe Terranova shares the caution. “Now, investors have to have some concerns about balance sheet constraint at Verizon with the introduction of the iPhone,” he adds.

Steve Cortes is also cautious of Verizon. “Apple is very good at squeezing their vendors,” he says. And if you’re a chart watcher he adds that the price action this year has been terrible.

Vote
Vote to see results
Total Votes:

Not a Scientific Survey. Results may not total 100% due to rounding.

However, that’s not to say there’s aren’t any winners to the Verizon iPhone.
Most of the traders think Apple wins. Analyst Timothy Horan says the Verizon iPhone is still a good deal for Apple suppliers and the wireless towers.

“Alactel-Lucent may be a beneficiary because they’re a top supplier of infrastructure to Verizon,” adds Brian Kelly.

However Kelly can’t get on board a long position in Apple. “The iPhone is almost old technology,” he says. “If I were long Apple on this catalyst I’d take profits. I think 4G and other technologies are the future.”

Elsewhere in the space Joe Terranova suggests watching Google and RIM . “Both are trading higher Tuesday and really they shouldn’t be,” he says. “Maybe the market is telling us something.”

------------

STOCKS, COMMODITIES JUMP AS EURO CRISIS CONCERNS EASE

Stocks bounced higher on Tuesday after Japan said it would buy 20% of EU debt issued this month. Copper and silver also traded higher.

What’s the trade?

I’m skeptical, says Brian Kelly, and still a seller of euro .


______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to fastmoney@cnbc.com.

Trader disclosure: On January 11th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova owns (GM); Terranova owns (C); Terranova owns (VRTS); Terranova owns (UPL); Terranova owns (PEP); Terranova owns (OXY); Terranova owns (GS); Terranova owns (LTD); Terranova owns (CNQ); Terranova owns (PVH); Terranova owns (CVI); Terranova owns (RIMM); Terranova owns (GLD) puts; Terranova owns (SLW) puts; Cortes is short (XRT) vs. S&P; Cortes is short (XHB) vs. S&P; Cortes is short (LVS); Cortes owns (EXC); Cortes owns (SVU); Cortes is long U.S. Treasuries; Cortes is short Gold; Cortes is short Corn; Cortes owns (TSN); Jon Najarian owns (GXDX), is short (GXDX); Jon Najarian owns (NFLX), is short (NFLX); Jon Najarian owns (BP), is short (BP); Jon Najarian owns (GM), is short (GM); Jon Najarian owns (F), is short (F); Jon Najarian owns (AXP), is short (AXP); Jon Najarian owns (AAPL), is short (AAPL); Jon Najarian owns (QCOM), is short (QCOM); Jon Najarian owns (STI), is short (STI); Jon Najarian owns (ARUN), is short (ARUN); Jon Najarian owns (EXPE), is short (EXPE)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (NCRI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (CLB)

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (ANDE)
Accounts Managed By Kanundrum Capital Own (CLF)
Accounts Managed By Kanundrum Capital Own (DRYS)
Accounts Managed By Kanundrum Capital Own USD
Accounts Managed By Kanundrum Capital Own (GLD)
Accounts Managed By Kanundrum Capital Own (IPI)
Accounts Managed By Kanundrum Capital Own (JJG)
Accounts Managed By Kanundrum Capital Own (MON)
Accounts Managed By Kanundrum Capital Own (OSK)
Accounts Managed By Kanundrum Capital Own (SDS)
Accounts Managed By Kanundrum Capital Own (SEF)
Accounts Managed By Kanundrum Capital Own (TBT)
Accounts Managed By Kanundrum Capital Own (VXX)
Accounts Managed By Kanundrum Capital Own (XLE)
Accounts Managed By Kanundrum Capital Are Short The Euro
Accounts Managed By Kanundrum Capital Are Short The Yen
Accounts Managed By Kanundrum Capital Are Short (XLF)

For Tim Horan
Oppenheimer & Co is a market maker in (AAPL)
No disclosures in (VZ)

For Joe Saluzzi
Saluzzi has no disclosures

CNBC.com with wires.

Contact Halftime Report

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET