This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Apple iPhone 5 Launch May Pop Telecom Dividend Bubble

"We believe the iPhone 5 release could be the largest consumer product launch in history," stated Thomas Seitz, a telecoms analyst with Jefferies, in an August note to clients. While that is bolstering expectations that Apple may be the first U.S. company to reach $1 trillion in market cap, it also exposes the threat to the telecom giants.

"The earlier than expected launch of the iPhone 5 is likely to have a major impact on the [third quarter 2012] service EBITDA margin expectations for the carriers," Seitz wrote, estimating AT&T and Verizon could see profit margins fall by as much as 6%, on roughly $1 billion in iPhone subsidy expense. Seitz ultimately argues that the longer-term case for AT&T and Verizon's earnings remains intact.

Investors may also be smart to follow investor flows as a sign of what's to come in telecom. In late August, telecom stock outflows were the greatest since 2008, according to a report from Bank of America Merrill Lynch equity strategist Savita Subramanian.

"After clients poured into Telecom during the first half of 2012 and the sector's relative P/E hit all-time highs, we have observed accelerating outflows from Telecom and the other defensive sectors in the second half and a rotation into cyclicals-- most notably Industrials and Tech," wrote Subramanian.

The investor stampede may signal expectations of the dividend hit that Moffett has been crowing about amid a 2012 telecom sector rally. Subramanian highlights record post-crisis telecom sector outflows as indicative of a rotation from dividend-yielding defensive stocks to cyclical stocks.

Investors fleeing "defensives" like telecoms for "cyclicals" may be a final irony: if Moffett is right about telecoms morphing from defensive into cyclical stock plays, it's the telecoms themselves that are becoming cyclical in nature.

-- Written by Antoine Gara in New York

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,982.59 +22.02 0.13%
S&P 500 1,978.91 +0.57 0.03%
NASDAQ 4,444.9090 -4.6550 -0.10%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs