Guggenheim: T-Mobile Set To Outperform Street Handset Estimates

The latest T-Mobile US, Inc TMUS conference commentary indicates the company will beat conservative handset estimates, according to Guggenheim.

The Analyst

Guggenheim’s Mike McCormack maintains a Buy rating on T-Mobile with an unchanged $85 price target.

The Thesis

The consensus handset net adds for Q4 is around 830,000, which assumes an “unrealistically high” change in churn from Q3 and suggests a 5 percent year-over-year decline in gross adds, McCormack said in a Wednesday note. The company is, therefore, likely to outperform the consensus expectation.

In view of the trends over the past couple of years and considering industry commentary on switcher volumes, a sequential decline in churn can be expected, driving a stronger handset add performance.

McCormack raised Q4 handset net adds estimate by 8.4 percent to 911,000 and the overall postpaid net add estimate for 2018 by 13.4 percent to 4.3 million. The estimate for the year is above than the high-end of T-Mobile’s guidance of 4.1 million. The higher estimate for net adds reflects stronger wearables as well as lower prepaid adds due to stiffening competition.

The revenue estimates for Q4 and 2018 have been raised from $11.2 billion to $11.3 billion and from $43.1 billion to $43.2 billion, respectively.

Price Action

Shares of T-Mobile were trading higher by 0.25 percent at $66.26 Thursday afternoon.