Verizon Earnings: LTE Growth & Smartphone Penetration Are Key

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Verizon ( VZ ) is expected to announce its Q2 earnings on July 22nd. During the earnings, we will be keenly watching the uptake in subscriber number for Verizon as it continue to expand its LTE 4G network development, thereby challenging AT&T ( T ) and Sprint ( S ) in the wireless market. We will also look for its data revenue growth number, which is a direct beneficiary of increasing smartphone sales at Verizon.

Our $34.50 price estimate for Verizon stock is about 5-10% below the market price.


Verizon's network upgrade to LTE gathering pace

Long Term Evolution, or LTE, is a next generation mobile network technology that will offer higher speeds compared to 3G networks. During the Q1 2011 earnings, Verizon talked about progress of its 4G LTE network expansion in the U.S. When Verizon launched LTE initially in Dec 2010, it launched the service in about 38 markets which covered 110 million PoPs (points of presence). Since then it has expanded rapidly and expects to cover 185 million PoPs in 175 markets in the U.S. by end of 2011. This rapid expansion is helping Verizon gain subscribers and could have been the major factor in Verizon gaining subscriber market share in the last quarter.

Increasing smartphone penetration for Verizon

During the last quarter's earnings call, Verizon indicated that about 60% of the phones sold in Q1 2011 were smartphones and this figure is a significant increase from the 36% in Q1 of 2010. Smartphone users are heavy data users, which benefits Verizon through higher data revenue growth. In our previous note titled Smartphone Trends Bolster Verizon, but Investors Might be Expecting Too Much , we discussed that smartphone penetration is a key driver for data revenue growth, which in turn is one of the important drivers to Verizon's stock value.

We will watch and see how these numbers stack up for Verizon in the upcoming earnings release.

See our complete analysis for Verizon



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: S , T , VZ

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