T-Mobile's Strategic Success: Despite Stock Fall, Analysts Elevate Price Targets as 5G Deployment Accelerates

Raymond James analyst Ric Prentiss maintains T-Mobile US Inc TMUS with a Strong Buy and raises the price target from $174 to $184.

The analyst-re-rated after 1Q23 came in mostly in line, and 2023 guidance was tweaked up, with stock buybacks strong and capex coming in high but expected to moderate in the back half of the year. 

Fixed Wireless High-Speed Internet (HSI) growth is steady, with 523K net adds in the quarter to hit 3.2 million total subscribers. 

T-Mobile is also well ahead in 5G deployment, including the most significant mid-band spectrum position, likely to drive subscriber and service revenue growth. 

By 2024, the integration will likely produce ~$8 billion in annual synergies. With the integration wrapping up, capex is coming down, leading to a significant ramp in cash flow per share and substantial shareholder returns in the form of buybacks.

Benchmark analyst Matthew Harrigan reiterates a Buy and raises the price target from $197 to $200. Momentum in underpenetrated smaller markets and with corporate customers is accelerating even as urban market customers become more aware of the company’s 5G leadership. 

T-Mobile remains agile in its strategic initiatives with last week’s Phone Freedom announcement aimed at poaching competitor’s customers locked into 3-year contracts. 

Go5G and Go5G Plus are de facto enhanced iterations of Magenta and Magenta Max, including more hotspot and North American data usage, including Mexico and Canada. At the same time, the economy essentials plan remains in the line-up.

T-Mobile is commanding pricing power off enhancements and a superior 5G network without naked price hikes. However, overall ARPU is mix dependent even as overall revenue growth and composite CLV (Customer Lifetime Value) benefit from business category and 55+ growth.

Credit Suisse analyst Douglas Mitchelson has an Outperform rating with a price target of $175. While 1Q23 might not be the typical beat and raise quarter, the top-line’s underlying core trends seem on track, margins are a bit ahead, and with an outsized $4.6 billion stock buyback in 1Q FCF/share is tracking ahead. 

T-Mobile’s new rate plans should be ARPU-accretive in 2H22. He expects the company to continue outperforming moderating wireless market growth (today’s rural share gain disclosures were encouraging).

Price Action: TMUS shares traded lower by 4.01% at $143.93 on the last check Friday.

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