10% Upside to Apple's Stock if Verizon Offers iPhones in 2011

Includes: AAPL, T, VZ
by: Trefis

Over the last few days, there has been increasing media speculation that Apple (NASDAQ:AAPL) will sell the iPhone through Verizon’s (NYSE:VZ) network from 2011 onwards. AT&T (NYSE:T) has had an exclusive agreement with Apple to distribute iPhone in the US since the launch of the phone in 2007. We estimate that the iPhone accounts for more than 50% of the value of Apple’s stock and a Verizon deal could have a meaningful impact on the company’s stock.

A deal with Verizon could lead to an increase in our expected Apple mobile phone market share if iPhone sales through Verizon can match expected sales through AT&T with minimal cannibalization of AT&T sales. We currently expect Apple to have 4.4% market share globally in 2011 and this could increase to about 5.9% in a best case scenario as a result of iPhone sales through Verizon. Such an increase would result in a 10% upside to our $267 Trefis price estimate for Apple’s stock.

Below we explain how Verizon could help Apple increase iPhone’s market share to around 5.9% by 2011.

Apple Could Sell 18 million iPhones Through AT&T in 2011

We currently estimate that Apple will sell about 60 million iPhones globally in 2011, implying 4.4% share within the global mobile phone market. We estimate that Apple will have about 30% share within the US smartphone market during that same period.

We estimate that a total of 60 million smartphones will be sold in the US in 2011 and that Apple will sell about 18 million iPhones through AT&T in 2011.

Apple Could Sell an Additional 20 million iPhones Through Verizon in 2011

We estimate that Verizon will have about 98 million subscribers (33% US market share) in 2011 compared to about 92 million AT&T subscribers (31% US market share).

Based on AT&T’s ratio of iPhone sales to total subscribers, we estimate that Verizon, in a best case scenario, would be able to sell as many as 20 million iPhones in 2011.

If sales of iPhones on Verizon have minimal cannibalization of AT&T iPhone sales, then Apple’s global mobile phone market share could increase to 5.9% rather than the expected 4.4% in 2011.

10% Upside to Apple’s Stock if iPhone Market Share Increases to 5.9% in 2011

Although we forecast that iPhone market share will increase to around 4.4%, there could be an upside of $26 (10%) to the $267 Trefis Price estimate for Apple’s stock if Verizon could help it increase its market share to 5.9% by 2011.

You can modify our forecast for iPhone market share above to see how Apple’s stock will be impacted if Apple’s shar were to increase at a faster rate than we forecast.

For additional analysis and forecasts, here is our complete model for Apple’s stock.

Disclosure: No Positions