THE APPLE INVESTOR: Verizon On The Horizon And Not Factored Into Estimates

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AAPL Shares Up As Stocks Bounce
As the market tries to find its footing, shares of AAPL are slightly up going into the week. Future catalysts for Apple stock include monthly NPD data (Mac / iPod business); iPhone unit updates and AT&T exclusivity expiration; iPad shipment ramp and international expansion; new content revenue streams such as video and books; and possible entry into the TV market with a refresh of Apple TV. AAPL trades at 14x Enterprise Value / Trailing Twelve Months Free Cash Flow.

Wall Street Research Notes Monday Morning (Various)
Not all the analysts are on vacation:

  • Steve Fox at Credit Agricole Securities (USA) Inc. believes that a disclosure from AT&T’s 10Q filing late Friday suggests AT&T is preparing investors for its iPhone exclusivity to come to an end. He continues to believe that Apple is likely to add Verizon by early 2011, which is not fully contemplated in his model. His Apple Buy thesis is driven in part by opportunities for further iPhone share gains in the rapidly expanding smartphone market due to additional carrier relationships, expansion of the geographic reach of iPhone 4, the benefits from an expanding of iPhone user base, and the potential for further hardware upgrades and price cuts.
  • J.P. Morgan analysts Mark Moskowitz addresses Mark Papermaster’s (Apple’s Senior Vice President, Devices Hardware Engineering) departure. He believes the exit signals that the fall-out from the antenna issue related to the iPhone 4 was bigger than previously indicated. That said, the focus should remain on Apple’s financial performance and its high-growth operating model. Apple remains his top pick and is also on the J.P. Morgan Analyst Focus List. Jay Yarow at Business Insider also weighs in.

The Verizon iPhone Just Around The Corner (TechCrunch)
A CMDA iPhone for Verizon is a tired rumour. But Steve Cheney at TechCrunch did some more digging and believes that Apple has submitted orders for millions of units of Qualcomm CDMA chipsets for a Verizon iPhone to run on due in December. This production run would likely be for a January launch. Will AT&T subscribers bolt once the nations largest carrier gets access to the iPhone? That might be a good pair trade; long Apple, short AT&T.

Multi-Carrier Approach Overseas Soon To Be Replicated In The U.S. (The Motley Fool)
The iPhone commands 23% of U.S. smartphone market share (according to Nielsen), but in Japan the number is closer to 72%. Outside of the U.S., where Apple has taken a multi-carrier strategy, market share numbers are staggering. The longer Apple waits to expand beyond AT&T in the U.S., the more time it gives Android to establish its platform. That wait could soon be over and by the sound of it, analysts aren’t factoring Verizon into numbers, which means the stock is trading at a significant discount to where it potentially should.

When Is Apple’s Stock Price Going To Catch Up With Fundamentals (Seeking Alpha)
Tyler Peglow doesn’t believe the market is properly rewarding Apple’s earnings power at $260 per share, both this year and in the future. Investors are currently paying 15x this year’s earnings. At 60%+ growth rates, that’s a great value as long as the company can hold profit margins. Aggressive investors looking to participate in the upside might want to look at the January 2011 $260-$300 call spread.

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