T-Mobile Wins The Race As Favorite Pick For Morgan Stanley, Beating AT&T and Verizon

Morgan Stanley analyst Simon Flannery highlights that Telco stocks have come under pressure in recent weeks after a decidedly mixed earnings season and a market rotation back to growth names and away from "defensive" stocks.
On the positive side, Flannery notes that wireless industry growth continues to look healthy, both on volumes and increasingly ARPUs, as pricing moves take hold.
It was not all positive, as Simon points out that AT&T Inc T (Over Weight, price target $22) kicked off earnings season with a $2 billion reduction to 2022 FCF guidance, and Verizon Communications Inc VZ followed with a second guidance cut in two quarters, citing weak gross adds and promo and other cost pressures.
Also Read: Wireless Carriers T-Mobile, Verizon, AT&T And Broadband-Internet Providers Comcast, Charter Compete For Customers
Flannery notes that the market should get initial 2023 guidance from Crown Castle Inc CCI (Over Weight, price target $190) in October, while Verizon (Equal Weight, price target $58), T-Mobile US, Inc TMUS (Over Weight, price target $159), and Telus Corp TU (Equal Weight, price target C$32) have already pointed to falling capital intensity driving free cash flow growth for 2023.
Turning to stocks, Simon adds that AT&T and Verizon both screen attractively from a valuation perspective with single-digit PEs and top 10 dividend yields within the S&P 500.
The analyst thinks they can hold up well in a tough market, but he still favors T-Mobile as his Top Pick within Telecom Services.
T-Mobile added 380 thousand postpaid net accounts and 1.7 million postpaid net customer additions, more than AT&T and Verizon combined and the highest Q2 ever.
Price Action: TMUS shares traded higher by 0.95% at $145.22 on the last check Wednesday.
Photo via Wikimedia Commons

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