T-Mobile (TMUS) Gains After Topping Q1 Consensus as 5G Story Accelerates, 'More to Come' Says Analyst

May 5, 2021 8:34 AM EDT
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Price: $144.70 -1.19%

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Shares of T-Mobile (NASDAQ: TMUS) are up 2.5% in pre-open Wednesday after the company reported stronger-than-expected earnings for its first quarter.

T-Mobile posted earnings per share (EPS) of $0.74 per share to beat the $0.55 per share expected from market analysts. Revenues were reported at $19.76 billion, which is again higher than the $18.90 billion expected.

Higher profit and revenues were driven by a big surge in the number of postpaid phone subscribers added - 773,000 vs 475,300. Total net additions were at 1.4 million, which is the “best in industry,” according to TMUS.

“We just keep pushing further ahead of the competition. Our network leadership is fueling customer momentum, delivering merger synergies and expanding our addressable markets for growth. We have so much confidence that we are raising 2021 guidance just one quarter into the year. Our mission is to be the very best at connecting customers to their world and we’re delivering on it,” Mike Sievert, CEO of T- Mobile.

The company also raised its guidance after witnessing robust demand for 5G services. The company now expects full-year postpaid net customer additions between 4.4 million and 4.9 million, which is better than a previous projection of 4.0 million to 4.7 million.

Another positive note from TMUS is that it now expects to garner $3.1 billion in merger synergies with Sprint. On the 5G front, the company has continued to make strong progress.

“T-Mobile continues to layer on the capacity and speed as Ultra Capacity 5G lights up in more places across the country. T-Mobile’s Extended Range 5G covers 295 million people across 1.6 million square miles, 4x more than Verizon and 2x more than AT&T,” the company’s statement reads.

Morgan Stanley analyst Simon Flannery maintained its “Overweight” rating and a $143.00 per share on TMUS, which is one of the top ideas within MS’s “Telecom Services” universe as there is “more to come” from TMUS.

“T-Mobile capped off Big 3 earnings with another strong quarter, and a positive outlook for the rest of the year and beyond. They beat on most operating and financial metrics, raised guidance and highlighted their many initiatives to drive their network leadership advantage, while expanding margins and cash flows via merger synergies. We are hopeful that this quarter may reassure investors that the company can continue to exceed expectations, even in this transition year as they invest in the future,” the analyst wrote in a note.

Raymond James analyst Ric Prentiss has upgraded its price target modestly to $146.00 per share from $145.00 following a strong Q1 earnings report.

“The combination with Sprint is increasing scale, pushing margins and cash flows higher, and providing the new T-Mobile with a very strong 5G "tiered layer wedding cake" spectrum position. And deal synergies are coming faster with $2.8-3.1B of the $7.5B annual total now expected to be achieved in 2021. Guidance for postpaid adds and Core EBITDA were increased by ~7% and 0.7%, respectively. All in all, we believe the FCF ramp as the new T-Mobile exits the integration period should be dramatic, and given the potential for up to $60B in buybacks from 2023-2025 (vs. current market cap of ~$160B), we see upside,” Prentiss said in a memo sent to clients.

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