T-Mobile US (TMUS) may be up around 50% over the past year, but the wireless carrier, which is 43% owned by Deutsche Telekom (DTEGY) and 24% owned by Softbank Group(SFTBF), could still wow investors as the year plays out.
Last year’s merger with Sprint made T-Mobile a more formidable competitor against rivals AT&T (T) and Verizon (VZ), and potential increases in customer retention together with further cost-cutting could see the company wring out even more value from this deal. The upcoming partnership with Alphabet (GOOGL) is also likely to give TMUS a boost.
The currently stretched valuation of TMUS shares may hinder any substantial potential rally in the near-term, however, further gains from current prices (around $130 per share) are a possibility.
TMUS Stock And Additional Upside From Sprint Deal
Last year’s merger with Sprint has clearly started to pay off as seen from TMUS’ recent performance, but the upside from this transaction may just be getting warmed up and the company could reap even more benefits from this deal in the coming 12 months.
T-Mobile has much higher customer retention rates relative to its competition, and by applying its strategy to minimize churn, it could hold onto a greater share of the customers it acquired from the Sprint transaction.
There is also room for additional cost synergies. By consolidating operations, T-Mobile cut $1.3 billion in annual costs in 2020 with a further $3 billion in cost savings and operating expense reductions expected this year which should filter straight to the bottom line.
But there’s even more on the table for TMUS stock than the extra “value add” from this deal. Other catalysts remain that could point to higher prices for the shares.
T-Mobile is slightly ahead of AT&T and leaps and bounds ahead of Verizon with regards to quarterly subscriber additions, so its organic customer growth is another positive for the stock going forward.
T-Mobile And Its Recent Deal With Google
Outside of its main wireless business, there’s another catalyst at play for T-Mobile US. The company recently signed a partnership deal with Google which will see the two companies joining up with internet television company Philo to provide a wireless-pay TV bundle package.
T-Mobile previously tried to go it alone with its TVision platform, but by partnering with Google and Philo, which provide their respective YouTubeTV and Philo platforms, the company may finally strike success with its expansion into other subscription telecom services.
So, does this make this stock a slam dunk opportunity at current prices?
On one hand, there’s plenty pointing to continued success in the coming 12 months. But with its valuation already stretched (48x projected 2021 earnings), it may be tough for shares to see additional gains in the near-term.
What Analysts Are Saying About TMUS Stock
According to TipRanks, TMUS comes in as a Strong Buy based on 12 analyst ratings comprised of 11 Buys and 1 Hold.
As for price targets, the average analyst price target on TMUS stock is $157.55 per share, implying around 21% upside from current prices over the next 12 months. Analyst price targets range from a low of $133 per share to a high of $190 per share. (See T-Mobile US stock analysis on TipRanks)
Bottom Line: Waiting for Weakness May Be The Best Move
Initial results indicate that T-Mobile’s acquisition of Sprint was a success and subscriber growth, 5G, and pay-tv bundle catalysts could help it “level up” as well. But what’s good for the company may not translate into near-term success for the stock.
With its current share price already factoring in its positive catalysts, it may be hard for TMUS to deliver in the short-term. For those willing to wait for a more opportune entry point, this may be a name to keep on one’s radar.
Disclosure: Thomas Niel held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
