Free cash flow growth and a big share buyback have been drivers of TMUS stock gains. While T-Mobile U.S.'s (TMUS) wireless market share gains versus AT&T (T) and Verizon Communications (VZ) have moderated, broadband subscriber growth is a new bright spot.
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Meanwhile, T-Mobile stock has gained 11% in 2024. On June 6, TMUS stock set an all-time high of 182.67. Technical ratings remain strong.
Capital Markets Day In October
"T-Mobile is the second-largest mobile network operator in the U.S. and a nascent player in broadband access services," said a recent Goldman Sachs report. "We see a more favorable competitive landscape for the U.S .wireless industry in the medium term. T-Mobile should benefit from that. We view T-Mobile as a net share gainer, but believe this momentum is beginning to moderate given improving execution at Verizon and AT&T. As T-Mobile expands its ambitions to consumer broadband using a mix of (fixed wireless broadband) and fiber, we believe the company can sustain its revenue, EBITDA, and free cash flow growth trajectory."
Deutsche Telekom (DTEGY) has owned a majority stake in T-Mobile since mid-2022. Further, Deutsche Telekom and T-Mobile will host a Capital Markets Day in October 2024 to provide long-term financial guidance.
Also, T-Mobile's updated outlook on wireless broadband growth could be key, said the Goldman Sachs report. The company has stated it's targeting 7 million to 8 million wireless broadband subscribers by the end of 2025. As of March 30, T-Mobile had over 5 million wireless broadband subscribers.
T-Mobile Deal-Making Spurt
Meanwhile, T-Mobile has been busy on the deal-making front. In March, T-Mobile announced the $1.35 billion acquisition of prepaid wireless firm Mint Mobile.
In April, T-Mobile announced that it has entered into a joint venture to acquire Lumos, which provides landline fiber broadband services to 320,000 homes. T-Mobile intends to invest $1.5 billion in the joint venture over the next two years. It's targeting 3.5 million homes passed with fiber broadband services by 2028.
Further, T-Mobile in May agreed to buy most wireless assets of U.S. Cellular (USM) for $2.4 billion. In addition, the deal is expected to close in mid-2025, subject to regulatory approvals. T-Mobile will acquire U.S. Cellular's wireless operations and 30% of radio spectrum assets.
Chicago-based U.S. Cellular serves about 4 million wireless subscribers, mostly in rural areas. Also, U.S. Cellular plans to keep most of its cellphone towers, which T-Mobile will continue to lease.
TMUS Stock: Q2 Earnings Due
Second quarter earnings for TMUS stock are due July 31.
"Topics on the Q2 earnings call may be on the U.S. Cellular acquisition, financial updates with the Mint deal officially closed, fiber joint ventures, the potentially elevated second half upgrade rates with artificial intelligence coming to the iPhone, and the impacts from the federal subsidy roll-off, said TD Cowen analyst Gregory Williams in a report.
While growth in the consumer market has slowed for all three national wireless carriers, analysts expect upside for T-Mobile in the corporate market. Also, T-Mobile may gain share in rural areas.
Further, T-Mobile rose 14% in 2023 after a strong run in November and December. The Nasdaq Composite gained 43%. The S&P 500 climbed 24%.
In 2022, TMUS stock outperformed the S&P 500 amid the bear market. Shares gained nearly 21% while the S&P 500 fell more than 19%.
While T-Mobile is churning out more free cash flow, Verizon and AT&T struggle to maintain dividends or increase shareholder returns.
T-Mobile announced a new $15 billion stock buyback through 2024 at the Goldman Sachs conference in September. In addition, T-Mobile announced a new $3 billion annual dividend.
TMUS Stock, Sprint Synergies
With the 2020 acquisition of Sprint, the T-Mobile owns more 5G radio spectrum than AT&T or Verizon. That has provided an important edge as new servicesare rolled out.
T-Mobile aims to keep its 5G spectrum edge. In a surprise, T-Mobile in September said it purchased 5G airwaves from Comcast (CMCSA). Depending on how many market licenses T-Mobile buys, the deal ranges in value from $1.2 billion to $3.3 billion. It is expected to close in 2028. In the meantime, T-Mobile will lease access from Comcast.
One concern is that wireless competition has intensified. Cable TV companies are bundling wireless services with their broadband products.
T-Mobile in 2023 said it will eliminate approximately 5,000 positions, just under 7% of the company's workforce.
While 5G smartphone-related revenue has disappointed for all wireless firms, T-Mobile has other levers to pull. Its 5G spectrum edge could provide a boost in picking up business customers as well as consumers in rural areas.
On the enterprise side, private 5G network services are expected to drive new business uses. The future of 5G wireless lies in the industrial Internet of Things, remote health care, drones and robotics, autonomous driving, and smart factories.
Technical Ratings For TMUS Stock
T-Mobile stock has an IBD Relative Strength Rating of 83 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS Rating of at least 80.
Meanwhile, TMUS stock holds an IBD Composite Rating of 89 out of 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Also, TMUS stock has an Accumulation/Distribution Rating of B-minus. That rating analyzes price and volume changes in a stock during the prior 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.
As of July 5, T-Mobile stock holds a 168.64 entry point. TMUS stock trades above a 5% a buy zone.
Follow Reinhardt Krause on Twitter@reinhardtk_techfor updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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