Piper Jaffray Neutral On Verizon After iPhone (AAPL, VZ)

Piper Jaffray has a Neutral rating and a $32 price target on shares of Verizon VZ after it announced yesterday it would begin selling a CDMA version of the Apple AAPL iPhone. In the research note Piper Jaffray writes, "Although we do not think Verizon will steal an excessive number of AT&T subscribers, we do think they will gain share of gross adds. The company should see a pick-up in port-ins from all the wireless carriers. We think the handset could help reverse the negative port-in/port-out ratio we believe Verizon experienced relative to Sprint in recent quarters. Additionally, we think the iPhone will help reduce churn; although, admittedly, most of the subscribers that wanted to leave for the iPhone have likely left already. We believe a meaningful portion of Verizon's base has been biding its time for the iPhone and could have left if rumors didn't pan out. This could be why our wireless channel checks indicated a softer 4Q10 - it wasn't exactly a well kept secret Verizon would get the iPhone in early 2011. What this all means is stronger iPhone sales and heavy subsidies. Recall, AT&T saw several hundred basis points of margin compression when they began subsidizing the iPhone. We believe Verizon will see similar near-term dilution. The greater the number of upgrades the more dilutive the impact will be, as there are limited-to-no new revenues associated with an upgrade unless it's from a non-smartphone, but even then it's still only a portion of what a new subscriber brings in. Longer-term, we believe the value proposition of an iPhone subscriber is compelling." Shares of VZ lost 56 cents yesterday to close at $35.36.