TMUS Stock: Is It A Buy Right Now? Here’s What T-Mobile Earnings, Chart Say

The outlook for TMUS stock versus the S&P 500 boils down to execution issues. Merger synergies with Sprint remain key for T-Mobile stock.

Another issue for T-Mobile US (TMUS) is whether management capitalizes on a 5G wireless spectrum advantage vs. AT&T (T) and Verizon Communications (VZ).

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TMUS stock has outperformed the S&P 500 amid the bear market in 2022. T-Mobile stock has gained 14% thus far this year while the S&P 500 is down 23%.

T-Mobile Stock: Buyback Announced

Also, T-Mobile on Sept. 8 announced  a repurchase program for up to $14 billion in common stock through September 2023, including up to $3 billion through the remainder of 2022. At a Goldman Sachs financial conference, Chief Executive Mike Sievert said management’s long term goal of up to $60 billion of share repurchases remains intact.

Deutsche Telekom (DTEGY), T-Mobile’s controlling stockholder, has no intention of selling into the $14 billion repurchase program. As a result, T-Mobile’s free float could be reduced by about 16%, analysts say. The share reduction will help boost EPS.

One plus for TMUS stock is that management continues to innovate. T-Mobile in August announced a partnership with Elon Musk’s SpaceX broadband satellite service. The two companies will provide wireless connectivity for unserved “dead spots” in the rural U.S. The service could be in testing before end of 2023. The proposed service will be compatible with the vast majority of existing smartphones. Customers would need to buy a separate satellite dish.

Second-quarter postpaid phone subscriber additions for TMUS stock came in above expectations.

Deutsche Telekom in April bought $2.4 billion in TMUS shares from Japan’s Softbank, increasing its stake to 48.4%. Deutsche Telekom expects to up its stake to over 50% in 2023.

TMUS Stock: Subscriber Growth To Slow?

Despite its already large 5G radio spectrum holdings, T-Mobile announced plans to purchase 600 MHz of spectrum for $3.5 billion.  The licenses, which T-Mobile has historically leased, will cover over 45% of the company’s postpaid subscriber base.

Meanwhile, T-Mobile added 5.84 million postpaid lines in 2021, up from 5.63 million in 2020. Management raised 2022 guidance to a range of 6 million to 6.3 million postpaid lines, up from 5.3 million to 5.8 million previously.

One concern is that wireless competition will intensify. Apple (AAPL) has introduced the iPhone 14, sparking a new round of promotions.

More former Sprint customers could switch to AT&T or Verizon. Meanwhile, cable TV companies are bundling wireless services with their broadband products.

Promotional activity for 5G smartphone plans has heated up.

Before the June 2021 quarter, T-Mobile had led the industry in postpaid phone subscribers for about seven years. But AT&T has led the industry in postpaid phone subscriber additions for the last five quarters. High-margin postpaid phone subscribers spend the most monthly.

T-Mobile and Dish Network (DISH) in June entered into a binding term sheet to amend a 2020 master network services agreement. T-Mobile will transfer 100,000-plus Boost-branded customers from former Sprint affiliates to Dish. Also, T-Mobile plans to improve in-market roaming services. In return, Dish will contribute $3.3 billion in revenue commitments over the term of the agreement.

T-Mobile Stock: 5G Mid-Band Network Build-Out Key

In addition, T-Mobile closed the merger with Sprint in April 2020.

T-Mobile and Sprint forecast that some $6 billion in back-office cost savings would result from combining billing operations and information technology departments. The companies also plan to combine wireless networks, cellphone towers and retail locations.

With the acquisition of Sprint, the new T-Mobile owns more midband radio spectrum than AT&T or Verizon. That could provide an important edge as 5G wireless services are rolled out. Midband airwaves provide much faster 5G data speeds with better coverage than low-band spectrum.

At the end of 2021, T-Mobile’s midband 5G network reached 210 million people. T-Mobile expects the midband 5G network to cover 300 million by 2023.

While trailing T-Mobile currently, Verizon and AT&T are racing to deploy their own 5G networks using mid-band spectrum.

Also, T-Mobile continues to expand 5G fixed broadband services to residential customers, taking on cable TV companies. It’s targeting 7 million to 8 million fixed broadband customers by 2025.

“TMUS stock added 560,000 fixed wireless customers in the June quarter,” Wells Fargo analyst Eric Luebchow said in a note.  “The message continues to be that TMUS is seeing two-thirds of its net adds come from urban and suburban locations — cable territory — although we envision that this mix will start to tilt toward more rural markets in 2023 as they build out 5G capacity in more small markets.”

T-Mobile launched a 5G Home Internet Lite service on Aug. 16. The service will have a 100 gigabyte per month data cap for $50. It will be available across T-Mobile’s entire wireless footprint, including markets where it lacks the excess capacity to offer its unlimited fixed broadband service.

TMUS Stock: Earnings Miss On One-Time Items

T-Mobile reported June-quarter earnings that missed analyst estimates due to one-time items, while revenue fell short of expectations.

T-Mobile said it added 723,000 postpaid phone subscribers vs. estimates of 575,000. In the second quarter, AT&T added 813,000 subscribers while Verizon added only 12,000.

Postpaid phone subscribers spend the most on wireless services and often sign up for unlimited data plans. They’re the most profitable customers.

In the three months ending June 30, T-Mobile reported a second-quarter loss of 9 cents on an adjusted basis amid the integration of Sprint. T-Mobile said impairment expense related to wireline assets and legal-related expenses tied to an August 2021 cyberattack lowered earnings.

Analysts predicted earnings of 26 cents a share on revenue of $20.12 billion. In the year-earlier period, T-Mobile earned 78 cents on revenue of $19.95 billion.

T-Mobile said core adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 10% to $6.6 billion.

T-Mobile Stock: Will 5G Wireless Boost Revenue?

In addition, TMUS stock has come a long way since U.S. regulators blocked AT&T’s proposed acquisition of T-Mobile in 2011. A rejuvenated T-Mobile in late 2013 unleashed its “Uncarrier”-branded marketing campaign along with aggressive price discounts.

Also, T-Mobile upgraded its wireless network, closing a performance gap with Verizon. The strategy paid off as T-Mobile grabbed the lion’s share of coveted “postpaid” subscribers that spend more on wireless data services.

However, growth has cooled since 2017 for all U.S. wireless companies. The big question is whether 5G wireless networks will create new revenue streams.

5G wireless networks will provide faster data speeds to consumer devices. Two-hour movies will be downloaded in 5 seconds vs. 6 minutes on a 4G network. Even so, the growth of some 5G stocks depends on the emergence of new consumer smartphone apps.

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.

After hitting an all-time high of 150.20 on July 16 in 2021, T-Mobile stock swooned.

TMUS stock tumbled in August 2021 after a major customer data breach that impacted over 54 million customer accounts.

Technical Ratings For T-Mobile Stock

But T-Mobile stock in early 2022 forged a first-stage, cup-with-handle chart pattern.

T-Mobile stock owns a IBD Relative Strength Rating of 89 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS Rating of at least 80.

Also, TMUS stock holds an IBD Composite Rating of 86 out of a best possible 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.

Is TMUS Stock A Buy Right Now?

TMUS stock has an Accumulation/Distribution Rating of D-minus. 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.

TMUS stock popped on its second-quarter earnings report. Having forged a flat base, TMUS stock owns an entry point of 139.08.

As of Sept. 24, T-Mobile stock has dropped out of a buy zone.

Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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