BTIG Raises T-Mobile's Price Target To $56, Doesn't Expect A Sprint Resurgence

T-Mobile US Inc TMUS reported Q2 results mostly in line with estimates.

BTIG analysts raised the price target of the company from $50 to $56.

2017 Outlook

The analysts expect T-Mobile to generate free cash flow of more than $3 billion in 2017, and mentioned that the company remains on track to delivering Cash EBITDA growth of 25 percent in 2017.

“The second quarter reports of wireless operators affirmed the relatively tame competitive dynamics of the industry,” said the analysts.

Market Competition

Verizon Communications Inc.VZ has been delivering robust cash flow performance and record 55 percent margins, which offer little reason for the company to stem the decline in its post-paid gross additions.

On the other hand, the BTIG analysts expect AT&T Inc. T to continue to expand its integrated service offerings, which are expected to help AT&T lower, but not fully eliminate, its post-paid subscriber losses.

AT&T is also likely to discover a new avenue for revenue growth via its efforts in IoT.

Sprint Resurgence Unlikely

In addition, the analysts stated that they did not expect a resurgence for Sprint Corp S, which, according to an unnamed Sprint spokesperson, represents an outlook that is “out of touch with nearly every other sell side analyst’s review of our business.”

While bulls might argue that Sprint was well positioned to replicate T-Mobile’s 2013 comeback, when the latter company increased its post-paid phone gross additions by 50 percent, that growth was to some extent driven by a 26 percent decline in Sprint’s phone gross additions in 2013, followed by an additional 20 percent decline in 2014.

“AT&T, Verizon and T-Mobile do not appear poised to post those types of declines nor have we seen that reflected in consensus estimates,” the analysts said.

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