The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (

Trefis

) --

Verizon

's

(VZ) - Get Verizon Communications Inc. Report

recent earnings pointed to strength in smartphone conversions.

Apple

's

(AAPL) - Get Apple Inc. (AAPL) Report

iPhone has added additional buzz. Nevertheless, our stock price estimate of $34.48 still stands below market price.

Below we take a quick look at Verizon's value, specifically highlighting the smartphone numbers. Verizon primarily competes with

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AT&T

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and

Sprint

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in the mobile and land line businesses.

Currently about 32% of Verizon retail postpaid subscribers are smartphone customers. In addition to this, the current rate of smartphone sales seems very promising. Verizon management mentioned during its last earnings announcement 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. Also, the company activated 2.2 million iPhones in less than two months.

Clearly, with 32% smartphone penetration and a 60% sell rate, a lot of new customers are signing up for smartphones. Verizon states that about 65% of total smartphone sales went to customers who were either new to Verizon or upgraded from basic phones. Increasing 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 expect continued growth in average data revenue per user given recent trends.

You can modify the forecast in the interactive chart below to see how this driver can impact Verizon's stock value.

Are Investors Expecting Too Much?

So far so good, but are investors expecting a bit too much? Despite our significant growth expectations in data revenue per user, our price estimate still stands below market price. A voice that echoes our expectations is that of Citadel Securities. According to a Barron's article, one Citadel Securities analyst believes that average revenue per user growth will not be as much as many buy side investors think.

See our complete

analysis for Verizon's stock here.

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