T-Mobile: a promising growth dynamic | Nasdaq


I am neutral on T-Mobile US (TMUS) because despite its recent growth momentum and improved competitive positioning, the stock is trading at a premium compared to its multiple historical averages.

T-Mobile US is a leading US wireless network operator and a subsidiary of German telecommunications company Deutsche Telekom. The company is headquartered in Bellevue, Washington. (See the top analyst stocks on TipRanks)

Strengths

T-Mobile is the second-largest wireless operator in the United States, with 106.9 million subscriptions at the end of its third quarter 2021.

The company offers wireless voice and data services under the T-Mobile and Metro by T-Mobile brands. The company has annual revenue of over $ 40 million and was named the No. 1 mobile operator in the United States by Consumer Reports in 2015.

Recent results

T-Mobile reported total quarterly revenue of $ 19.62 billion, an increase of 1.8% year-on-year. The improvement is due to the increase in revenues from Services and strong customer growth. However, he was unable to meet consensus estimates of $ 20.11 billion.

The company reported high revenue of $ 14.7 million, which grew 4.1% year-over-year, including an improvement in postpaid revenue of 6% d year to year.

It posted strong net income of $ 691 million and diluted earnings of $ 0.55 per share, up from $ 1.25 billion per share and $ 1 per share last year. The reduction in net income this year was attributed to increased merger costs.

Its prepaid revenue was $ 2.48 billion, an improvement of 4.1% from the previous year quarter. Net prepaid customer additions reached 66,000 in the third quarter of 2021, and average revenue per user rose to $ 39.49, up 2.6%. Wholesale revenue was $ 944 million and other service revenue was $ 493 million.

The company also reported a record baseline Adjusted EBITDA of $ 6 billion. Free cash flow from operating activities increased 25% year-over-year to $ 3.5 billion. It also posted free cash flow of $ 1.6 billion, an improvement of more than four times over the third quarter of the previous year.

T-Mobile US also recorded industry-leading postpaid net additions of 1.3 million, postpaid phone net additions of 673,000 and postpaid account net additions of 268,000.

The company has now increased its outlook for full year 2021 and expects net additions of postpaid customers in the range of 5.1 million to 5.3 million, compared to the previous outlook of 5 million. to 5.3 million.

It also posted a full-year core adjusted EBITDA of between $ 23.4 billion and $ 23.5 billion, an improvement over the previous outlook of $ 23.3 billion to 23.3 billion.

Assessment measures

T-Mobile stock appears richly valued at current levels. His P / E multiple is currently 41x, which is well above his five-year average of 33.2 times.

Additionally, its EV / EBITDA ratio is 8.7x, which is also above its five-year average of 7.9x.

That said, growth is expected to be strong over the next few years, with revenues expected to grow 16.9% in 2021 and 2.7% in 2022.

The Taking of Wall Street

According to Wall Street analysts, T-Mobile is getting a strong buy analyst consensus based on 13 buy ratings, no hold ratings and one sell rating over the past three months. Additionally, T-Mobile’s average price target of $ 165.77 places the upside potential at 44.5%.

Summary and conclusions

T-Mobile is a major player in the telecommunications industry and has made strategic decisions in recent years, including its merger with Sprint.

This has improved its competitive positioning and positioned it for its current growth. Additionally, Wall Street analysts are extremely bullish on the stocks here, and their consensus price targets are significantly higher than the current stock price.

That said, the stock is trading at a significant premium over its historical multiples.

Disclosure: At the time of publication, Samuel Smith does not have a position in any of the titles mentioned in this article.

Disclaimer: The information in this article represents the views and opinions of the author only, and not the views or opinions of TipRanks or its affiliates. Read the full disclaimer>

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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