T-Mobile Impresses The Street Yet Again In Q2

Shares of T-Mobile US Inc TMUS were trading higher by nearly 4 percent early Thursday morning in reaction to the company's impressive second-quarter earnings report, which attracted mostly praise from Wall Street analysts.

Deutsche Bank: Who Needs M&A?

One of the main takeaways from T-Mobile's report is the ability of the company to generate organic growth, Deutsche Bank's Matthew Niknam commented in a research report. If anything, an inorganic route through M&A activity now looks "less appealing." After all, T-Mobile is following the old adage "if it ain't broke, don't fix it."

Meanwhile, T-Mobile's Adjusted EBITDA and free cash flow strength in the quarter and expectations for these metrics to remain strong, the company could now be opening the door to a dividend, the analyst added. However, this potential catalyst isn't expected in the near-term as management may be prioritizing its cash for: 1) higher leverage post 600MHz auction and 2) strategic transactions which may still be evaluated by management.

T-Mobile's postpaid phone volumes in the quarter of 786,000 in the quarter exceeded the analyst's expectations of 611,000 due to lower churn. The beat in the quarter is even more impressive when factoring in the ongoing heightened competitive landscape in the industry.

Looking forward, the analyst believes T-Mobile will likely take around 97 percent of total industry postpaid phone net adds this quarter, which is a figure that has been the case in recent periods.

However, the stock's 40 percent gain over the past year implies limited upside to consensus estimates and company targets. As such, Niknam maintains a Hold rating on T-Mobile's stock with an unchanged $70 price target.

Barclays: Room To Run

Barclays' Amir Rozwadowski reaffirmed T-Mobile as a Top Pick in the telecom sector after the company reported better than expected subscriber metrics and encouraging outlook. This should "dull any concerns" about the company's ability to continue gaining market share and also implies management is "pacing ahead of plan."

T-Mobile's "uncharacteristic" increase to its EBITDA outlook also signals the company is not compromising on profitability in its pursuit of gaining market share.

"A clear beat and raise against heightened competition demonstrates that T-Mobile's momentum is unlikely to ease anytime soon," the analyst emphasized. "Ongoing progress in its fundamentals, expectations for improving cash generation, and its position as potential beneficiary of strategic options (of which management seems to be evaluating several) leads us to reiterate our Overweight rating."

Shares remain Overweight rated with a price target boosted from $70 to $73.

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