The outlook for TMUS stock versus the S&P 500 boils down to execution issues. Merger synergies with Sprint remain key for T-Mobile stock.
Another issue for T-Mobile US (TMUS) is whether management capitalizes on a 5G wireless spectrum advantage vs. AT&T (T) and Verizon Communications (VZ).
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T-Mobile reported September-quarter earnings that topped analyst estimates while revenue missed. The company added more wireless postpaid phone subscribers than expected – and led the industry for the first time since the March quarter of 2021.
Some technical ratings of T-Mobile stock have improved. And T-Mobile has formed a new base.
TMUS stock has outperformed the S&P 500 in 2022. T-Mobile stock has gained 28% thus far this year while the S&P 500 is down 21%.
T-Mobile Stock: Buyback Announced
Wireless competition could intensify. Apple (AAPL) has introduced the new iPhone 14. Wireless service providers responded with new promotions.
Also, T-Mobile on Sept. 8 announced a repurchase program for up to $14 billion in common stock through September 2023, including up to $3 billion through the remainder of 2022. At a Goldman Sachs financial conference, Chief Executive Mike Sievert said management’s long term goal of up to $60 billion of share repurchases remains intact.
Deutsche Telekom (DTEGY), T-Mobile’s controlling stockholder, has no intention of selling into the $14 billion repurchase program. As a result, T-Mobile’s free float could be reduced by about 16%, analysts say. The share reduction will help boost EPS.
One plus for TMUS stock is that management continues to innovate. T-Mobile in August announced a partnership with Elon Musk’s SpaceX broadband satellite service. The two companies will provide wireless connectivity for unserved “dead spots” in the rural US The service could be in testing before end of 2023. The proposed service will be compatible with the vast majority of existing smartphones. Customers would need to buy a separate satellite dish.
Deutsche Telekom in April bought $2.4 billion in TMUS shares from Japan’s Softbank, increasing its stake to 48.4%. Deutsche Telekom expects to up its stake to over 50% in 2023.
TMUS Stock: Subscriber Growth To Slow?
Despite its already large 5G radio spectrum holdings, T-Mobile announced plans to purchase 600 MHz of spectrum for $3.5 billion. The licenses, which T-Mobile has historically leased, will cover over 45% of the company’s postpaid subscriber base.
Meanwhile, T-Mobile added 5.84 million postpaid lines in 2021, up from 5.63 million in 2020. Management raised 2022 guidance to a range of 6 million to 6.3 million postpaid lines, up from 5.3 million to 5.8 million previously.
One concern is that wireless competition will intensify. Apple (AAPL) has introduced the iPhone 14, sparking a new round of promotions.
More former Sprint customers could switch to AT&T or Verizon. Meanwhile, cable TV companies are bundling wireless services with their broadband products.
Promotional activity for 5G smartphone plans has heated up.
Before the June 2021 quarter, T-Mobile had led the industry in postpaid phone subscribers for about seven years. But AT&T has led the industry in postpaid phone subscriber additions for the last five quarters. High-margin postpaid phone subscribers spend the most monthly.
T-Mobile and Dish Network (DISH) in June entered into a binding term sheet to amend a 2020 master network services agreement. T-Mobile will transfer 100,000-plus Boost-branded customers from former Sprint affiliates to Dish. Also, T-Mobile plans to improve in-market roaming services. In return, Dish will contribute $3.3 billion in revenue commitments over the terms of the agreement.
T-Mobile Stock: 5G Mid-Band Network Build-Out Key
In addition, T-Mobile closed the merger with Sprint in April 2020.
T-Mobile and Sprint forecast that some $6 billion in back-office cost savings would result from combining billing operations and information technology departments. The companies also plan to combine wireless networks, cellphone towers and retail locations.
With the acquisition of Sprint, the new T-Mobile owns more midband radio spectrum than AT&T or Verizon. That could provide an important edge as 5G wireless services are rolled out. Midband airwaves provide much faster 5G data speeds with better coverage than low-band spectrum.
At the end of 2021, T-Mobile’s midband 5G network reached 210 million people. T-Mobile expects the midband 5G network to cover 300 million by 2023.
While trailing T-Mobile currently, Verizon and AT&T are racing to deploy their own 5G networks using mid-band spectrum.
Also, T-Mobile continues to expand 5G fixed broadband services to residential customers, taking on cable TV companies. It’s targeting 7 million to 8 million fixed broadband customers by 2025.
T-Mobile launched a 5G Home Internet Lite service on Aug. 16. The service will have a 100 gigabyte per month data cap for $50. It will be available across T-Mobile’s entire wireless footprint, including markets where it lacks the excess capacity to offer its unlimited fixed broadband service.
TMUS Stock: Q3 Subscriber Additions Top Estimates
For the three months ending Sept. 30, T-Mobile earnings came in at 40 cents a share on an adjusted basis, down 27% from a year earlier, amid the integration of Sprint.
The company said revenue fell a small fraction to $19.48 billion. Wireless service revenue rose 4% to $15.4 billion, in line with estimates.
Analysts predicted T-Mobile would report earnings of 30 cents a share on revenue of $20 billion. In the year-earlier period, T-Mobile earned 55 cents on revenue of $19.62 billion.
T-Mobile said core adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 11% to $6.7 billion, in line with estimates.
T-Mobile said it added 854,000 postpaid phone subscribers vs. estimates of 739,000. In the third quarter, AT&T added 708,000 phone subscribers while Verizon Communications added 8,000.
Postpaid phone subscribers spend the most on wireless services and often sign up for unlimited data plans.
T-Mobile said it added 578,000 home and small business broadband subscribers, edging by estimates of 575,000. Most of the broadband subscribers use T-Mobile’s 5G wireless network.
T-Mobile repurchased $669 million of its own stock in the third quarter.
T-Mobile Stock: Will 5G Wireless Boost Revenue?
In addition, TMUS stock has come a long way since US regulators blocked AT&T’s proposed acquisition of T-Mobile in 2011. A rejuvenated T-Mobile in late 2013 unleashed its “Uncarrier”-branded marketing campaign along with aggressive price discounts.
Also, T-Mobile upgraded its wireless network, closing a performance gap with Verizon. The strategy paid off as T-Mobile grabbed the lion’s share of coveted “postpaid” subscribers that spend more on wireless data services.
However, growth has cooled since 2017 for all US wireless companies. The big question is whether 5G wireless networks will create new revenue streams.
5G wireless networks will provide faster data speeds to consumer devices. Two-hour movies will be downloaded in 5 seconds vs. 6 minutes on a 4G network. Even so, the growth of some 5G stocks depends on the emergence of new consumer smartphone apps.
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.
After hitting an all-time high of 150.20 on July 16 in 2021, T-Mobile stock swooned.
TMUS stock tumbled in August 2021 after a major customer data breach that impacted over 54 million customer accounts.
Technical Ratings For T-Mobile Stock
But T-Mobile stock in early 2022 forged a first-stage, cup-with-handle chart pattern. Currently, TMUS stock has formed a double-bottom chart pattern.
T-Mobile stock owns a IBD Relative Strength Rating of 92 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS Rating of at least 80.
Also, TMUS stock holds an IBD Composite Rating of 86 out of a best possible 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.
Is TMUS Stock A Buy Right Now?
TMUS stock has an Accumulation/Distribution Rating of B. 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.
TMUS stock popped on its September-quarter earnings report.
As of Nov. 7, T-Mobile stock trades in a buy zone with a new 142.99 entry point from the double-bottom base. Investors should be cautious of any buys amid the bear market and Fed rate hikes.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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