By now we all know that the Apple iPhone will probably revolutionize the mobile phone market. So instead of talking about how great we think this phone will be, we wanted to take a closer look at the two stocks involved in this launch, Apple (AAPL) and AT&T (T).

Apple’s stock is somewhat expensive right now with a P/E ratio of 40 and a 1.5 PEG ratio. Sure if the iPhone does blow the market away, like we expect it to, then Apple could easily trade at $160. However, a lot of the current stock price is the anticipation of the iPhone being the next iPod like product. If the iPhone fails to be a big success the stock price will suffer. That puts a lot of risk on an expensive stock.

We pitched AT&T a while ago mainly due to the completed acquisition of Cingular, which is now the new AT&T wireless. AT&T has everything to benefit from the iPhone and almost nothing to lose. New subscribers are flocking in from other wireless carriers to get a hold of this exclusive product. These new subscribers will not only buy the phone but also sign up for data plans, which are high margin accounts for AT&T. Say the iPhone flops; AT&T is still a strong company and growing at a nice pace without the iPhone.

Our prediction is that the iPhone will be a big success. Apple (AAPL) is a great stock to own but more risky then AT&T (T). Both should do very well with the launch of the iPhone, but we recommend sticking with AT&T to provide upside with minimal downside risk. For the risk takers out there you should also be in Apple, even at these high levels.

Tags:   AAPL Stock   Apple iPhone Stock   AT&T Stock   Stock Picks Online   T NYSE  

Posted on June 7, 2007 9:39 AM | Digg | del.icio.us