Investors Seem To Be Materially Discounting T-Mobile Shares Based On 2 Factors

T-Mobile US Inc TMUS has suffered a minor decline over the past month, largely due to the fact that investors do not appear certain that the mobile carrier will take part in potential future sector deals, following the news of a possible Comcast Corporation CMCSA/Sprint Corp S tie up and DISH Network Corp DISH deal with Amazon.com, Inc. AMZN.

With T-Mobile multiples now below pre-election levels, it appears that investors have materially discounted the possibility T-Mobile being involved in a big time merger agreement.

“While we would argue that the introduction of unlimited plans earlier this year should justify some multiple compression, current valuation levels now seems to materially discount the prospects for: 1) a deal and 2) shareholder return initiatives,” said Barclays analyst Amir Rozwadowski.

Barclays is anticipating steady fundamentals from T-Mobiles second-quarter results, with the company expected to take the majority of postpaid net add share in the quarter. Rozwadowski sees continued runway for T-Mobile to grow via secondary and tertiary markets through broader spectrum reach and an under-penetrated enterprise segment.

While the T-Mobile/Sprint deal appears to have lost some steam, Barclays believes that a deal with Sprint would provide the most financial and operational benefits for T-Mobile. If a deal does not go through, a potential buyback announcement is expected.

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