'Still A Beat And Raise Story': Wall Street Cheers T-Mobile Following Earnings Beat

T-Mobile US Inc TMUS traded higher by 3.9% on Wednesday after the company reported a first-quarter earnings beat and impressive subscriber growth numbers.

For the first quarter, T-Mobile reported adjusted EPS of 74 cents on revenue of $19.8 billion. Both numbers beat consensus analyst estimates of 57 cents and $18.9 billion, respectively. Revenue was up 77.8% from a year ago.

T-Mobile said it added 1.2 million net postpaid subscribers in the first quarter, exceeding Wall Street estimates of less than 1.1 million. T-Mobile’s subscriber growth in the quarter significantly outpaced top competitors Verizon Communications Inc. VZ and AT&T Inc. T.

Looking ahead, T-Mobile guided for 2021 postpaid subscriber growth of between 4.4 million and 4.9 million subscribers, up from its previous guidance range of between 4 million and 4.7 million subscribers. Management also said it is expecting average revenue per user to grow this year as well.

Related Link: Chegg Analysts Bullish After Q1 Report: 'Balanced Subscriber Beat'

Outpacing Competitors: Credit Suisse analyst Douglas Mitchelson noted T-Mobile’s subscriber growth is leading AT&T and Verizon by a healthy margin at this point.

“After much investor hand-wringing heading into earnings given competitors’ Y/Y net add gains, T-Mobile once again showed its marketing prowess and remarkable merger execution,” Mitchelson said.

Morgan Stanley analyst Simon Flannery said 2021 is off to a hot start for T-Mobile, but investors can expect more to come in 2021.

“We are hopeful that this quarter may reassure investors that the company can continue to exceed expectations, even in this transition year as they invest in the future,” Flannery said.

Bank of America analyst David Barden said T-Mobile is “still a beat and raise story.”

“Looking ahead, TMUS is confident that as remaining regions open up and activity returns to normal, it will be a net beneficiary of the increased activity in the switcher pool,” Barden wrote.

Cash Flow Ramp Coming: Raymond James analyst Ric Prentiss said investors should expect a “dramatic” ramp in free cash flow for T-Mobile following its integration with Sprint.

“The combination with Sprint is increasing scale, pushing margins and cash flows higher, and providing the new TMobile with a very strong 5G ‘tiered layer wedding cake’ spectrum position,” Prentiss wrote.

KeyBanc analyst Brandon Nispel said additional near-term upside for T-Mobile’s stock may be limited due to its valuation premium to AT&T and Verizon.

“We believe investors can be patient as TMUS should begin to produce meaningful FCF, which should lead to shareholder-friendly capital allocation long term,” Nispel wrote.

Ratings And Price Targets:

• Credit Suisse has an Outperform rating and a $165 target.
• Morgan Stanley has an Overweight rating and a $143 target.
• Raymond James has an Outperform rating and a $146 target.
• KeyBanc has an Overweight rating and a $155 target.
• Bank of America has a Buy rating and a $155 target.

(Photo: T-Mobile)