What’s up with T-Mobile Stock?

T-Mobile stock has had a bumper year so far, rising 16% year-to-date, versus the broader S&P which remains down about 20% over the same period. While mobile carrier stocks, in general, have outperformed this year as investors seek stability from the sector’s steady cash flows and lower valuations as the US enters a more strict, T-Mobile shares have fared much better than rivals such as Verizon (down 3% year-to-date) and AT&T
(up 5% since the start of the year). Covid-19 gave a boost to subscriber additions for US mobile carriers as people increasingly relied on phones and wireless devices during the pandemic. T-Mobile also expects the momentum to continue this year. The carrier’s first-quarter 2022 results were stronger than expected and it also raised its outlook for postpaid adds in 2022, forecasting 5.3 million and 5.8 million net adds, about 300,000 more than ‘previously.

Now, although T-Mobile shares look expensive relative to their peers, trading at around 48 times consensus 2022 earnings, markets are forecasting a huge boost in earnings and cash flow from 2023. earnings in recent quarters have been impacted by costs related to the integration of Sprint
wireless network with T-Mobile after their merger in 2020, T-Mobile stands to benefit significantly as the synergies of the deal materialize. Dismantling Sprint’s legacy network, along with SG&A savings, is expected to help the company achieve $5.2-5.4 billion in merger synergies by the end of this year. . Additionally, while Verizon has traditionally been the network to beat in terms of quality of service, T-Mobile is emerging as the network leader in the 5G era. By the end of 2021, T-Mobile’s 5G network covered 310 million people, of which 210 million are covered by Ultra Capacity 5G, well ahead of AT&T and Verizon, and this broad deployment could help the company acquire subscribers, especially outside urban areas. . T-Mobile was also recently named the best wireless carrier in PCMag’s well-regarded annual mobile network comparison.

Overall, the growing subscriber base and cost savings are likely to significantly help T-Mobile’s cash flow in years to come. The company previously guided free cash flow between $13 billion and $14 billion in 2023, compared to levels of around $6 billion in 2021, with the company noting that this number could reach $18 billion in 2026. Rising cash flow should help fund major stock buybacks in coming years, which could also support T-Mobile’s share price.

We value T-Mobile at around $164 per share, about 23% ahead of the current market price. See our analysis on T-Mobile valuation: Expensive or cheap for more details on what drives our price estimate for the company. Also discover our analysis of T-Mobile revenue for more details on the company’s main business segments and likely revenue trends.

Stock prices have fallen precipitously across all sectors over the past few months and we are now in a bear market for the first time since March 2020, when the Covid-19 outbreak triggered a stock market crash. We capture key Dow Jones trends during and after major stock market crashes in our interactive dashboard analysis,’Comparison of stock market crashes.’

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