Based in Bellevue, Washington, T-Mobile US, Inc. (TMUS) offers wireless services for branded postpaid and prepaid, and wholesale customers in the United States, Puerto Rico, and the United States Virgin Islands. Having the first and largest nationwide 5G network, the company has more than 7 million total net customer adds. TMUS offers its services under three brands — the T-Mobile, Metro by T-Mobile, and Sprint brands.

On a year-to-date basis, TMUS has rallied 56.6% to close yesterday’s trading session at $122.78. The company started offering the iPhone 12 Pro Max and iPhone 12 mini at the beginning of this month. TMUS’ successful merger with Sprint Corp in April provided a boost to its growth. The stock’s impressive performance and the potential upside based on a number of factors have helped the stock earn a “Buy” rating in our proprietary ratings system.

Here is how our proprietary POWR Ratings system evaluates TMUS:

Trade Grade: B

TMUS is currently trading above its 50-day and 200-day moving averages of $114.04 and $107.49, respectively, indicating an uptrend. Moreover, TMUS has gained 24.6% over the past six months, reflecting solid short-term bullishness.

Driven by the Sprint merger and continued customer growth, TMUS’ total revenues increased 74.2% year-over-year to $19.3 billion for the third quarter that ended September 2020. With revenue growth having outdone expense increase, the company’s net income increased 44% year-over-year to $1.3 billion. EPS increased 1,011.1% sequentially to $1.

TMUS started offering the iPhone 12 Pro Max and iPhone 12 mini from November 6th where new and existing customers can get the phones for discounts up to $950 for the iPhone 12 Pro and iPhone 12 Pro Max, with 30 monthly bill credits when adding a line and trading in an eligible iPhone. The company also unveiled three distinct streaming services last month. Customers who sign up for TVision Live TV+ or Live Zone packages by December 31^st will get Apple TV+ for a year, in addition to the option to add Apple TV 4K.

Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, TMUS is pretty well positioned. The stock is currently trading just 3.5% below its 52-week high of $127.03, which it hit on November 6^th.

Looking at the past three years, the stock has grown 119.3% due to its strong fundamentals, its ability to adapt quickly to the market demands, and advancements in technology. TMUS’ revenue and EBITDA grew at a CAGR of 14.4% and 22.8%, respectively, over the past three years.

Peer Grade: B

TMUS is currently ranked #3 out of 25 stocks in the Telecom – Domestic industry. Other popular stocks in the telecom-domestic group are Verizon Communications Inc. (VZ), AT&T Inc. (T), and BlackBerry Limited (BB).

TMUS gained 56.6% year-to-date while VZ, T and BB declined 2.5%, 27.6% and 23.2% respectively, over this period.

Industry Rank: B

The Telecom-Domestic industry is ranked #7 out of the 123 StockNews.com industries. This is not surprising given that people are spending much more time at home communicating with others online. This has led to a rise in demand for advanced technologies in this industry.

With the rising number of coronavirus cases in the United States and Europe, there is the possibility of a second wave. So, revenues of companies providing voice, data, text, sound and video transmission through wired, wireless, or satellite networks are further expected to increase in the coming months.

Overall POWR Rating: B (Buy)

TMUS is rated a “Strong Buy” due to its short-and-long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Ratings.

Bottom Line

TMUS has the potential to soar in the upcoming months despite gaining 56.6% so far this year, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for TMUS. It has an average broker rating of 1.22, indicating a favorable sentiment. Out of 22 Wall Street analysts that cover the stock, 20 rated it a “Strong Buy.” Moreover, TMUS has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $19.72 billion for the quarter ending December 2020 indicates 66% growth from the same period last year. Its EPS is expected to grow at 13.7% next year. This outlook should keep TMUS’ price momentum alive in the near term.

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TMUS shares were trading at $122.31 per share on Tuesday afternoon, down $0.47 (-0.38%). Year-to-date, TMUS has gained 55.97%, versus a 11.70% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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