Underdog cell phone service provider Sprint (S) may join the ranks of the big guns in cell phone -- AT&T (T) and Verizon (VZ) if Sprint can, as speculated, secure the rights to Apple's iPhone 5 on Oct. 7, as chattered.
What's more, if Sprint gets the iPhone 5, the calculation here argues that it will be not only a game-changer for the company, but also an image enhancer, and morale-booster for Sprint.
In addition, there's also a chance that the iPhone 5 to Sprint will spark an iPhone 5 Wave, if you will, in the cell phone service provider sector -- in other words, a renaissance in the sector -- one that attracts new minds (translation: more subscribers) that previously had not considered the iPhone 5 or even smartphone service before. Talk about an opportunity for increased revenue and earnings!
Earlier, this space evaluated high-risk stock Sprint, and an operational summary is below, followed by a short summary of the outlooks for AT&T and Verizon. A full, iPhone 5 era review of both AT&T and Verizon will follow in the weeks ahead.
Sprint: iPhone 5 Is Magic
Most likely, Sprint's revenue, which totaled $32.3 billion in 2009 and $32.6 billion in 2010, with the iPhone 5 would rise more than the 2.9 percent to 3.2 percent revenue growth many analysts are projecting for the company in 2011. The two percent revenue growth for 2012 also would look a tad light.
The Thomson Reuters First Call FY2011/FY2012 EPS estimates for Sprint are a loss of 82 cents and a loss 67 cents. That FY2011 EPS loss estimate looks about 30-35 percent high, and the FY2012 EPS loss estimate looks about 60-65 percent high, according to my analysis. Each loss estimate of mine assumes Sprint secures the iPhone 5.
Sprint Nextel Corporation is a high-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 50% position in S now; then buy another 25% in two months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of my S position before January 2012 and I'd put a sell/stop loss at: $1.25.
Sprint's shares closed Thursday down 5 cents to $3.42.
AT&T: The iPhone's Home
AT&T's revenue should rise to $127 billion in 2011 and $129 billion in 2012, up from $124 billion in 2010, led by customer gains and faster growth in wireless services. Also, wireline data gains should help offset continued attrition in consumer and business voice (landline) operations.
The Thomson Reuters First Call FY2011/FY2012 EPS estimates for AT&T are $2.37 and $2.54.
AT&T's shares closed Thursday down 12 cents to $28.01.
Verizon: Making Up for Lost Time
Verizon, meanwhile should register 2011 revenue of $110 billion in 2011 and $115 billion in 2012, up from $106.6 billion in 2010. Wireless data services should be the revenue increase star, boosted by -- you guessed it -- the iPhone. Meanwhile, FiOS Internet/cable t.v. service gains will offset pressure in the mass markets consumer group. VZ's strong network will continue to serve as a tailwind.
The Thomson Reuters First Call FY2011/FY2012 EPS estimates for Verizon are $2.25 and $2.61.
Verizon's shares closed Thursday down 21 cents to $35.41.
Disclosure: L.C. Jacobs of New York, N.Y. reviews stocks on a quarterly, semi-annual, and annual basis.
L.C. Jacobs has no positions in stocks reviewed, but does own federal, municipal, and corporate bonds.