The outlook for TMUS stock boils down to Sprint merger synergies, free cash flow growth and expectations for a big share buyback. Another catalyst for T-Mobile US (TMUS) could be market share gains owing to its 5G wireless spectrum advantage vs. AT&T (T) and Verizon Communications (VZ).
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Also, TMUS stock has gained 1% in 2024.
An overhang on TMUS stock was removed Dec. 27 when Deutsche Telekom (DTEGY) and former T-Mobile parent SoftBank resolved an issue dating back to the Sprint merger in 2020. T-Mobile issued 48.8 million shares, valued at $7.6 billion, to SoftBank at no cost.
Since mid-2022, Deutsche Telekom owned a majority stake in T-Mobile.
Deutsche Telekom is expected to host a Capital Markets Day in October 2024 to provide long-term guidance. T-Mobile could host a similar event.
TMUS Stock: Big Buyback Underway
While growth in the consumer market has slowed for all three national wireless carriers, analysts expect upside for T-Mobile in the corporate market. Also, T-Mobile may gain share in rural areas.
Further, T-Mobile rose 14% in 2023 after a strong run in November and December. The Nasdaq Composite gained 43%. The S&P 500 climbed 24%.
In 2022, TMUS stock outperformed the S&P 500 amid the bear market. Shares gained nearly 21% while the S&P 500 fell more than 19%.
While T-Mobile is churning out more free cash flow, Verizon and AT&T struggle to maintain dividends or increase shareholder returns.
T-Mobile announced a new $15 billion stock buyback through 2024 at the Goldman Sachs Communacopia and Technology Conference on Sept. 6. That follows a $14 billion buyback authorized last year. In addition, T-Mobile announced a new $3 billion annual dividend.
T-Mobile Stock, Sprint Synergies
Analysts now project $7.5 billion in merger synergies between T-Mobile and Sprint.
T-Mobile aims to keep its 5G spectrum edge. In a surprise, T-Mobile in September said it purchased 5G airwaves from Comcast (CMCSA). Depending on how many market licenses T-Mobile buys, the deal ranges in value from $1.2 billion to $3.3 billion. It is expected to close in 2028. In the meantime, T-Mobile will lease access from Comcast.
One concern is that wireless competition will intensify. Cable TV companies are bundling wireless services with their broadband products.
T-Mobile in August said it will eliminate approximately 5,000 positions, just under 7% of the company's workforce.
With the 2020 acquisition of Sprint, the T-Mobile owns more 5G radio spectrum than AT&T or Verizon. That has provided an important edge as 5G wireless services are rolled out.
While 5G smartphone-related revenue has disappointed for all wireless firms, T-Mobile has other levers to pull. Its 5G spectrum edge could provide a boost in picking up business customers as well as consumers in rural areas.
In 2022, T-Mobile added 2 million 5G fixed broadband subscribers, up from 546,000 the year earlier. T-Mobile aims to sign up 7 to 8 million 5G fixed broadband subscribers by 2025, with services available to about 40 million US. households.
On the enterprise side, private 5G network services are expected to drive new business uses. The future of 5G wireless lies in the industrial Internet of Things, remote health care, drones and robotics, autonomous driving, and smart factories.
Technical Ratings For T-Mobile Stock
T-Mobile stock has an IBD Relative Strength Rating of 75 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS Rating of at least 80.
Meanwhile, TMUS stock holds an IBD Composite Rating of 81 out of 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Also, TMUS stock has an Accumulation/Distribution Rating of C-plus. That rating analyzes price and volume changes in a stock during the prior 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.
As of Feb. 14, T-Mobile stock holds a 161.19 entry point. TMUS stock trades at the top of a 5% a buy zone.
Follow Reinhardt Krause on Twitter@reinhardtk_techfor updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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