T-Mobile (TMUS) Potential Capacity Crunch May Slow Momentum vs. Sprint (S) - FBR

FBR Capital analyst David Dixon raised his price target on T-Mobile US, (NASDAQ: TMUS) to $54.00 (from $48.00) but maintained a Market Perform rating. Dixon said the company is firing on all cylinder, although a potential capacity crunch may slow momentum relative to Sprint (NYSE: S).

Dixon commented, "An elegant Ericsson and Nokia driven network upgrade plan that from inception created a 10X increase in capacity continues to bear fruit for TMUS, as seen in strong 3Q financial and preannounced subscriber results. The recent launch of the T-Mobile One unlimited plan and market perception of T-Mobile as a value leader are resonating well with consumers, as both net add and churn were well ahead of Street estimates. After more than three years of continuous share taking, we believe TMUS is close to full network capacity. We expect Sprint to build momentum from here, and even though heightened competition has forced both VZ and T to diverge their businesses away from wireless while undergoing a network topology shift that favors edge application processing, storage, and content, we think margin pressure is likely needed for TMUS to gain more market share. As more of the device base are seeded with 700 MHz, this will accelerate the capacity crunch that could stymie momentum. We maintain our Market Perform rating but raise our price target to $54 from $48."

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 $51.19 yesterday.

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