) competes primarily with AT&T (
) and Sprint (
) in the mobile business, in addition to other secondary businesses
like wire-line communications.
Our price estimate for Verizon's stock stands at
, roughly in line with the current market price.
We previously discussed Verizon's upside potential in the
smartphone business (see article
Rising Smartphone Penetration Presents Upside to
Verizon's Stock Value
). Now we turn to tablets. Is there upside to Verizon from this
product segment, or has the potential growth already been factored
into the stock price?
Tablets are growing fast and this means more data revenue
opportunities for service providers like Verizon since consumers
often prefer a mobile data network for such devices. Goldman Sachs
analysts are reportedly anticipating 224% growth in the tablet
market in 2011. The report compares this rise to an expected 6%
growth in the personal computer market and further suggests that
tablets could cannibalize 35% of notebook sales this year. As these
additional devices enter the market, service providers will see a
sharp increase in the number of U.S. cellular subscribers.
Population Growth vs Cellular Subscriber Growth
If we assume a U.S. population growth rate of about 1% per year
through our forecast period, and compare this to our
U.S. cellular subscriber forecasts
, it seems plausible that there could be roughly 10% more devices
in the network than people in the population by the end of this
period, as many people use several devices like tablets and
See our full analysis and $36.62 price estimate for Verizon
If we look at the projected growth in tablets as discussed
above, it could very well be that our cellular subscriber forecasts
(counting different devices separately) are conservative and thus
additional upside to our price estimate for Verizon is possible.
You can estimate the potential impact by modifying the trend line
in the chart above.
Imagine a hypothetical situation where mobile phones reach 100%
penetration and tablets reach 30% penetration in the U.S. by the
end of our forecast period. Such a scenario would imply a massive
430 million+ cellular subscribers. This scenario would imply 8%
upside to our current estimate of
$36.62 for Verizon
. We note that this scenario only takes tablets and mobile phones
into account. Other connected devices like smart grids, smart cars,
e-readers and alarms present incremental opportunities.