Apple in Trouble as SpaceX's Recent Moves Could Threaten iPhone Sales

Dow Jones
3 hours ago

SpaceX's spectrum acquisition could pose a risk to Apple's iPhone sales, says a BofA Securities analyst.

SpaceX announced last week that it was acquiring a a low-band spectrum license portfolio as Starlink Mobile aims to become a major mobile carrier in the U.S.

Starlink wants to compete with the "big three" telecommunications companies, AT&T, Verizon Communications, and T-Mobile US. All three stocks fell more than 10% on Friday following the acquisition announcement as Wall Street tried to digest how Starlink could eventually take market share from existing telecom giants.

BofA Securities analyst Wamsi Mohan points out that telecom companies aren't the only ones that could face headwinds if Starlink proves to be a formidable competitor.

It's possible that Starlink could offer competitive service prices to try t0 win over new customers, which would be a problem for telecom companies. But lower-priced services may also lead Starlink to offer smaller subsidies for new smartphones, Mohan said.

Apple relies heavily on carrier promotions to sell iPhones. "US carriers are structurally Apple's largest marketing and financing partner," Mohan wrote. The risk is that Starlink could offer smaller promotions, leading to fewer people upgrading their iPhones.

Apple didn't immediately respond to a Barron's request for comment. Shares were up 0.7% on Monday and have risen 25% this year.

Still, any threat is years away, as building out a competitive mobile network will take years.

Mohan wrote that "a lot more has to be done" for Starlink to become a true competitor in the telecom space. Citi analyst Michael Rollins agrees, writing on Oct. 9 that he doesn't expect SpaceX "to materially impact operating results of the big-3 Telcos until at least 2029."

Wall Street is still paying attention now to this potential risk. Shareholders are looking for both Apple and the telecom companies to get ahead of any threat that Starlink might pose.

"Near term, carriers are likely to defend with heavier promotions, a tailwind for upgrades," Mohan said. He continues to rate Apple Buy with a $370 price target.

 

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