T-Mobile Stock A Buy At $140?

T-Mobile stock has had a lackluster year, remaining roughly flat year-to-date, considerably underperforming the S&P 500 which remains up by about 17% over the same period. While the broader wireless sector has been weighed down by aggressive postpaid phone service offerings by cable players such as Comcast
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, and cooling demand for wireless services following a boost through Covid-19, T-Mobile’s underlying performance has actually been pretty strong. The company’s Q2 results were better than expected. Earnings beat estimates coming in at $1.86 per share, while the company added 760,000 postpaid phone net subscriber adds – which was its best second-quarter increase in eight years. In comparison, Verizon and AT&T
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added 8,000 and 326,000 new postpaid phone subscribers, respectively.

So, is T-Mobile stock still a buy? There are good reasons to consider the stock. T-Mobile has a lead in 5G deployment across the U.S., given its lead in the deployment of the mid-band spectrum it acquired via the Sprint deal. The company already covers over 275 million Americans with mid-band 5G spectrum, which offers strong speeds and wide coverage, almost two years ahead of the timeline AT&T and Verizon have set for themselves. This could help the company maintain its lead in subscriber additions. For perspective, T-Mobile just upped its guidance for the full year, projecting net postpaid customer additions of between 5.6 million and 5.9 million, up from 5.3 million to 5.7 million. T-Mobile’s valuation multiple is also looking a bit more reasonable considering that the stock has declined a bit in recent months, with earnings also set to surge this year, with the costly Sprint network integration now complete. While the stock traded at over 60x forward earnings last year, it currently trades at about 19x forward earnings. Although this is higher than rivals AT&T and Verizon, which trade at single-digit multiples, T-Mobile’s superior subscriber growth, as well as its relatively more manageable leverage, make this premium more than justified. We value T-Mobile at about $158 per share, which is about 14% ahead of the current market price. See our analysis on T-Mobile valuation: Expensive or Cheap? for more details on what’s driving our price estimate for the company. Also, check out our analysis of T-Mobile revenue for more details on the company’s key business segments and how revenues are likely to trend.