4 compelling telecom stocks as the iPhone 6 sells out

By Chris Lau for Kapitall.

Demand for both the iPhone 6 and iPhone 6 Plus is overwhelming, which is good news for Apple (AAPL) investors. But it might mean even better news for carriers, especially for Sprint (S). Sprint’s aggressive data plan offered alongside the iPhone launch should mean stronger customer growth ahead.

Generous data plan

Sprint launched a $60/month plan that offers unlimited data if they forgo a smartphone subsidy. Overall, this should help the firm gain customers. ARPU, or average revenue per user, should also improve.

AT&T (T) and Verizon (VZ) will also offer iPhone 6. They, too are reportedly backordered for the iPhone 6 Plus. Of the three companies, Sprint does not pay a dividend. Conversely, AT&T’s dividend yields 5.33 percent, while Verizon’s dividend yields 4.38 percent:

Click on the interactive chart to view data over time. 

AT&T could face pricing pressure for its plans as Sprint aggressively seeks subscriptions. Customers may not defect to Sprint though: AT&T has better coverage, which is something many consumers are willing to pay more for. Verizon and AT&T are both moving in a different direction than Sprint. They are both diversifying revenue streams by moving towards media and content.

Despite some competitive risks from Sprint, AT&T and Verizon are income investing plays. They both pay a good dividend and generate healthy profits. Last quarter, AT&T earned $0.68 per share, while Verizon earned $1.01 per share.

Sprint’s stock came under pressure after investors worried that price cuts to its plans would hurt profits. It also ended its bid to buy T-Mobile (TMUS). Though the stock is down 35 percent in 2014, it rallied 20 percent this month. 

Sprint moved up $1, closing at $7 recently. The stock might see some profit taking in the short term, but it looks likely the company will rebound back towards its pre-selloff price over the next few months.

Bottom line

Strong demand for the iPhone 6 will benefit all carriers, but income investors should consider AT&T and Verizon. Sprint will also grow its customer base, thanks to a competitive plan offering.

 

Click on the interactive chart to view data over time. 

 

1. Apple Inc. ( AAPL): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $608.73B, most recent closing price at $101.66. 

 

 

2. Sprint Nextel Corp. ( S): Offers wireless and wireline communications products. Market cap at $27.62B, most recent closing price at $7.0. 

 

3. AT&T, Inc. ( T): Provides telecommunication services to consumers, businesses, and other service providers worldwide. Market cap at $178.92B, most recent closing price at $34.50. 

 

4. T-Mobile US, Inc. ( TMUS): Provides mobile communications services. Market cap at $200.63B, most recent closing price at $48.40. 

 

5. Verizon Communications Inc. ( VZ): Provides communication services. Market cap at $24.89B, most recent closing price at $30.83. 

 

(List compiled by Chris Lau. Monthly returns sourced from Zacks Investment Research.)

 

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