Verizon Wireless: The Best Way To Invest In The iPhone 5 Release

Apr. 4.12 | About: Verizon Communications (VZ)

With the iPhone 5 release being rumored for sometime in June it is time to start deciding what the best investment is for the release. Many people would say Apple (AAPL) is the best investment because it's an Apple product. However, the average investor cannot afford to buy many Apple shares with its high price of over $600. So where can these average investors put their money so that they can possibly profit off the iPhone 5 release? The next best choice besides Apple would be the companies who sell these phones, the wireless phone providers. The two most notable are AT&T (T) and Verizon Wireless (VZ).

AT&T Verizon Wireless
P/E Ratio 47.62 45.25
PEG Ratio 6.39 4.37
Current Ratio 0.75 1.01
Debt/Equity 0.61 1.53
Dividend 1.76 2.00
Dividend % 5.60% 5.20%
Click to enlarge
All values were gathered from finviz.com

The financial ratios of AT&T and Verizon do not reveal much about which is the better company to invest in. The only factors that really stand out are AT&T's current ratio and Verizon's Debt/Equity ratio. AT&T's current ratio is a problem because according to that ratio AT&T can only pay back three-fourths of its current liabilities. A company should at the very least be able to cover its current liabilities. Although to be fair, Verizon can just barely cover its current liabilities. Verizon's Debt/Equity ratio is another cause for concern. A Debt/Equity ratio of 1.53 means Verizon has quite a bit of debt to take care of which could be a bad sign for the future. Other than these two ratios, both companies pay decent dividends which is a plus for long term investing.

With the ratios not giving a definitive answer as to who the iPhone 5 winner may be, it only makes sense to look at the company as a whole. One important factor of the iPhone 5 release is the rumor that it will have 4G LTE capabilities. This makes sense since the new iPad also had 4G LTE capabilities. When talking about LTE, Verizon is the clear short term winner. Verizon has had, and will continue to have, better LTE coverage than AT&T. Although AT&T is aggressively working on LTE technology and coverage, it will not be able to stand up to Verizon's coverage for at least another year, which could hinder its iPhone 5 sales.

Another factor to look at is the data plan costs for each company. Both AT&T and Verizon offer similar data plans at similar prices, however, Verizon excels with its 10GB data plan for $80/month. AT&T's highest smart phone data plan is 5GB for $50 with a $10 charge for each additional GB of data. Therefore, in order to get 10GBs of data with AT&T, the cost would be $100 which includes the $50 charge for the first 5GB and the extra $10 per GB charge for the extra 5GBs.

All things considered I believe Verizon Wireless comes out on top for the iPhone 5 launch in June. Verizon has better LTE coverage and better data plans that will bring in the same people as AT&T's data plans, but will also capture those who have a very high usage of data. With both companies being fairly similar I believe that more consumers will go to Verizon for the larger coverage of 4G LTE (which is 10 times faster than 3G). Therefore, Verizon Wireless is the better investment to prepare for the iPhone 5 launch in June.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.