T-Mobile (TMUS) Should Trade at Premium to Peers, Says Pacific Crest

Pacific Crest reiterated an Overweight rating on T-Mobile US, (NASDAQ: TMUS) with a price target of $48. Comments follow meetings with management. Analyst Michael Bowen thinks T-Mobile should trade at a premium to peers given more attractive revenue growth and increasing free cash flow.

"Subscriber trends are strong as the company has taken steps to capture subscriber market share in early 2016. Binge On and other promotions are resonating with subscribers, and we expect the company to increase its distribution, subscriber share and online channel sales," said Bowen.

"While TMobile previously said that porting ratios have worsened slightly over the past couple of quarters, this appears to have reversed course with porting for T-Mobile improving relative to Sprint and Verizon, while AT&T has shown some limited success. It appears that Sprint's 50% off promotion resonated early relative to T-Mobile but began to fade recently," continued the analyst.

Disusing churn, Bowen said, "T-Mobile's postpaid churn continues to show y/ y improvements. In addition, the company expects postpaid churn below 1.3% in 1Q16. Current consensus estimates call for total churn of 2.5%. 1.3% postpaid churn, applied to our numbers, implies high prepaid churn . We expect upside to current churn estimates. T-Mobile currently trades at 6.3x 2016 EV/EBITDA compared to 5.9x for its peer group, and our price target of $48 represents 7.2x 2016 EV/EBITDA based on our estimates. Stronger revenue growth and improving free cash flow reinforce our belief TMUS should trade at a premium multiple to its peers."

For an analyst ratings summary and ratings history on T-Mobile US, click here. For more ratings news on T-Mobile US, click here.

Shares of T-Mobile US, closed at $38.44 yesterday.

You May Also Be Interested In

• T-Mobile Rolls Out Two New Internet Plans to Give Customers Enhanced Options for Home and On the Go
• NextEra Energy (NEE) PT Raised to $67 at BofA Securities
• Itau BBA Reiterates Outperform Rating on Usiminas (USIM5:BZ) (USNZY) following Q1 results