Analysts were mixed Wednesday on the prospect for Verizon Communications Inc. following Tuesday's long-awaited announcement that Verizon Wireless will begin carrying the iPhone early next month, though they seemed to agree that the news bodes well for Apple Inc.
Goldman Sachs upgraded, while Deutsche Bank downgraded Verizon's shares, with Goldman's Jason Armstrong saying that Wall Street's current earnings estimates don't reflect the company's full opportunity in the wireless sector this year.
Verizon, Armstrong wrote in his upgrade to "Buy" from "Neutral," can continue its recent share gains and see wireless service revenue grow 10 percent in 2011. He raised his target price to $42 from $34.
Verizon Wireless is the company's joint venture with British mobile communications provider Vodafone Group PLC.
Armstrong also downgraded AT&T, whose status as the exclusive U.S. carrier for the iPhone has come to a close.
"Our forecasts indicate proportionate revenue growth at VZ will exceed that at AT&T by 4.6 (percent) in 2011," the analyst wrote, downgrading AT&T to "Neutral" from "Buy." He also lowered his target price to $32 from $35.
Deutsche Bank, meanwhile, downgraded Verizon to "Hold" from "Buy," mainly on valuation. Analyst Brett Feldman said while he expects a strong year for the company's wireless business with the iPhone and its ultra-fast 4G network that has started rolling out in some U.S. cities, this is for the most part already reflected in the stock.
Apple stands to benefit regardless.
"We believe another carrier relationship is good for the iPhone and helps Apple compete head-to-head with Android offerings at Verizon," wrote Janney Capital Markets analyst William Fearnley Jr., who rates Apple "Buy." He expect Verizon to sell 8 million iPhones this year. The deal could also boost iPad sales, with customers looking at the iPhone likely taking a longer look at the Apple tablets too, he added.
Shares of Verizon rose 22 cents to $35.58 in late morning trading. Shares of AT&T climbed 20 cents to $28.11.
Shares of Apple, meanwhile, climbed $2.54 to $344.10, flirting with a 52-week high of $344.96.
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