Limited Headwinds For T-Mobile Seen At Barclays, Price Target Raised

Barclays maintains its Overweight rating and raised the price target on T-Mobile US Inc TMUS given solid execution and limited (if any) headwinds to its share gain/margin expansion/cash flow inflection thesis.

The comments come as T-Mobile reported better-than-expected second-quarter results, driven by easing competition, improving network quality and the ongoing cost saving initiatives.

The highlights of the results include:

• 1.9 million total net additions
• 890,000 branded postpaid net adds
• 646,000 branded postpaid phone net adds
• 476,000 branded prepaid net adds
• Record-low branded postpaid phone churn of 1.27 percent (down 6 bps quarter-over-quarter and 5 bps year-over-year)

The carrier edged up its 2016 net addition guidance for branded postpaid to 3.4 million to 3.8 million from 3.2 million to 3.6 million and narrowed adjusted EBITDA target to $9.8 billion to $10.1 billion from $9.7 billion to $10.2 billion.

Related Link: T-Mobile Says It Quadruples Binge On Services

Further, Barclays noted that T-Mobile could achieve $1.5 billion–$1.8 billion in free cash flow in 2016 as the company expects a significant second-half ramp heading into material 2017 growth.

The brokerage raised its current year EPS estimate by $0.02 to $1.34 and next year EPS forecast by $0.10 to $2.07. It also increased the price target on the stock by $1 to $50.

At time of writing, shares of T-Mobile had gained 0.72 percent on the day to $45.97.

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