A downgrade of wireless carriers following the release of Apple’s iPhone 5 on Friday elicited a swift, decisive backlash from Stephen Weiss of Short Hills Capital.
On CNBC’s “Fast Money,” Stifel Nicolaus Senior Telecom Services Analyst Christopher King expanded on the morning’s downgrade: “We estimate it could be as much as $10 billion in subsidies just between Verizon and AT&T between now and the end of the year. So clearly, earnings estimates need to be trimmed.”
Weiss minced no words.
“First of all, you’re wrong,” he said. “This is the most obvious trade. It happens every, single time we launch a phone, No. 1.
(Read More: iPhone 5 to Help Economy More Than Fed: Ex-Official)
“No. 2, Verizon came out the other day and said that they don’t expect much of a hit to margin.
“No. 3, the subsidies did change. As a matter of fact, I ordered two iPhones today from Verizon, and I had an all-you-can-eat data plan. They said, ‘Hey, you can keep that, but you’re going to have to pay full price for the phone.’ If you want the subsidy for the phone, you’ve got to come down to a share-everything plan, which is going to take your data usage to only 10 gigabytes vs. unlimited.”
Weiss argued that the move would increase margins by doing away with the subsidy Verizon was providing for new iPhone users.
Other mobile carriers with iPhone exposure include Sprint, MetroPCS and Leap Wireless.
Weiss said the downgrade provided him with a trade.
“I don’t think on a very, very obvious trade you downgrade a stock where they’re going pick up significantly more users, No. 1, and the yield is still extremely attractive. So I’d buy more, down a buck. Thank you for the opportunity.”
Trader disclosure: On Sept. 14, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Jon Najarian is long call sreads in AAPL; Jon Najarian is long call sreads in GS; Jon Najarian is long call sreads in JPM; Jon Najarian is long call sreads in SBUX; Jon Najarian is long call sreads in FB; Jon Najarian is long call sreads in AMZN; Jon Najarian is long call sreads in GOOG; Jon Najarian is long call sreads in VZ; Jon Najarian is long call sreads in S; Jon Najarian is long call sreads in LVS; Jon Najarian is long call sreads in WYNN; Jon Najarian is long GLUU; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long STSI; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long JPM CALLS; Pete Najarian is long INTC; Pete Najarian is long YHOO; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Steve Weiss is long AAPL CALLS; Steve Weiss is long TBT; Steve Weiss is long JPM; Steve Weiss is long BAC; Steve Weiss is long BBT; Steve Weiss is long VOD; Steve Weiss is long VZ; Steve Weiss is long T; Steve Weiss is long MT; Steve Weiss is long VALE; Steve Weiss is long QCOM; Steve Weiss is long BRCM; Steve Weiss is long AIG; Steve Weiss is long TOT; Steve Weiss is long HK; Steve Weiss is long COP; Steve Weiss is long MSFT; Steve Weiss is long M; Steve Weiss is short AAPL Puts; Steve Grasso is long PAY; Steve Grasso is long QQQ; Steve Grasso is long HPQ; Steve Grasso is long MU; Steve Grasso is long ZNGA; Steve Grasso is long KO; Steve Grasso is long KSS.
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