T-Mobile (TMUS) is an American telecommunication company serving almost 120 million postpaid and prepaid customers. The company has had strong growth in the past few years, especially after its $26 billion merger with Sprint in 2020.
The combined company has gained market share from the likes of Verizon and AT&T. As of the first quarter of this year, it was the second-biggest wireless network operator after Verizon.Â
The merger has helped it grow its revenues exponentially. Before the deal, the company was making $45 billion in revenue, a figure that grew to $79 billion in 2022. Its annual profit has soared from $3.46 billion in 2019 to over $8.37 billion in 2023.
T-Mobile has outperformed Verizon and AT&T in the past three years as its total return rose by 23.80% compared to Verizon’s drop of 14% and AT&T’s growth of 7.68%.
T-Mobile’s stock was trading at $177.68 on Tuesday as the HypeIndex rose by 116%.Â
Positive hype
T-Mobile’s hype has grown as investors focus on the upcoming quarterly results scheduled for Wednesday this week.
Analysts are hopeful that the company will report strong financial results. The average estimate is that its revenue will come in at $19.5 billion, a 1.9% increase from the same quarter in 2023.Â
They also anticipate that its annual revenue will be $80.2 billion followed by $83.46 billion in 2026. This revenue will come organically and from its acquisitions. It recently announced a plan to acquire Metronet in a bid to boost its fiber network.
Analysts expect that its earnings per share will improve from last year’s $1.86 to $2.8. For the year, analysts see its earnings rising from $6.93 to $9.01.Â
T-Mobile has a long record of beating Wall Street’s and its internal estimates. It has outperformed the earnings numbers in three of the last four earnings.Â
The company has also boosted its shareholder returns, especially through repurchases. It spent $3.5 billion repurchasing its stock in the first quarter and is in the process of implementing a $19 billion repurchase that was authorized in 2023. As a result, its outstanding shares have dropped from 1.23 billion in 2020 to 1.17 billion this year.
T-Mobile is also reasonably cheap compared to the broader market. It has a forward P/E ratio of 19.6, lower than its five-year average of 40. The S&P 500 index has a forward multiple of 21.
T-Mobile is also trading at a big discount vs analysts' estimates. The average target for the stock is $194.97, higher than the current $177.68.
T-Mobile recently received a big $2.67 billion wireless contract by the Navy.
Negative hype
T-Mobile is in an industry that is seeing slow growth. It has a forward revenue growth of 1.6% and EBITDA growth of 7.5%. In contrast, the S&P 500 index’s revenue growth is almost 10%, according to FactSet.
T-Mobile, like other telecom companies, is highly in debt. It has over $72.8 billion in long-term debt. While the company is not facing any debt crisis, it could impact its future investments.
Its internet solutions business could be disrupted by Elon Musk’s Starlink.
The bottom line on T-Mobile
T-Mobile stock price has done well in the past few years. It has jumped from last year’s low of $123.45 to a high of $176. It reached an all-time high of $185.38 on July 17th.Â
The stock has consolidated since June and formed an ascending channel pattern and is now slightly above its lower side.
It has remained above the 50-day and 100-day moving averages. TMUS has also moved to the second phase of the three dives pattern, meaning that it could bounce back as buyers target the upper side of the channel at $185.40.
Still, stocks tend to be highly volatile after earnings, as we saw with Google and Tesla last week. The two blue-chip stocks dropped sharply after their mixed financial results.
Altogether, T-Mobile seems like a good telecom stock as it continues to gain market share from the likes of Verizon and T-Mobile.
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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.
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