T-Mobile: Growth Drivers Yet To Unfold, But The Stock Is Fairly Valued

Link to our full article posted on November 26th, 2022: T-Mobile: Growth Drivers Yet To Unfold, But The Stock Is Fairly Valued


T-Mobile’s stock (NASDAQ: TMUS) has shown resilience during inflationary pressures and rising interest rates, which prompt a major sell-off in the equity market, and performed better than its peers. The stock is trading at $151 per share, hitting our 12-month TP and implying a 25% gain since our BUY call in December last year.


With its 5G leadership thanks to its early mid-band spectrum deployment and an exciting growth story of fixed-wireless access (FWA) broadband having likely been priced into the stock, does TMUS still hold growth drivers yet to unfold?


First, TMUS recently lighted up its 5G standalone (SA) network supporting the 2.5 GHz band spectrum. While 5G SA network is nothing new for TMUS, it only supported the 600 MHz band. In addition, we believe that it could help TMUS gain market share in the enterprise market.


Second, FWA offerings have been one of 5G success stories. While concerns were raised whether the capacity will be enough for further FWA growth, a significant portion of TMUS’ FWA subs came from rural areas, where excess capacity remains. We believe that recent acquisition of 2.5 GHz, mainly from rural areas, in Auction 108 will provide TMUS with an advantage.


Still, the stock is now trading at 9x EV/EBITDA. Thus, we downgrade the stock to “HOLD.”


Picture source: JESHOOTS-com – Pixabay