Market Overview

After Failed Merger Talks, Continuing The T-Mobile Vs. Sprint Pair Trade

Share:
After Failed Merger Talks, Continuing The T-Mobile Vs. Sprint Pair Trade

The highly competitive nature of the wireless carrier market in 2017 is expected to moderate in 2018, while the industry as a whole is also likely to benefit from a more favorable macro environment, according to KeyBanc Capital Markets. 

The Analyst

KeyBanc Capital Markets' Brandon Nispel maintains an Overweight rating on T-Mobile US Inc (NASDAQ: TMUS)'s stock with a price target boosted from $72 and $76. The analyst maintains an Underweight rating on Sprint Corp (NYSE: S)'s stock with a price target lowered from $5.50 to $5. 

The Thesis

A T-Mobile and Sprint merger is off the table, Nispel said. But a price war between mobile carriers is unlikely, he said in a research report. (See the analyst's track record here.)

The wireless industry will continue to be competitive on devices but "more muted" on data plan price competition, as the competition will focus on differentiation between the unlimited data plans, Nispel said. 

Between T-Mobile and Sprint, T-Mobile could experience continuation of service revenue growth even with flat average revenue per user, Nispel also said. On the other hand, Sprint's year-over-year ARPU comparison will likely be negatively impacted from a change in its insurance program, while its churn will also increase in 2018, he said. 

T-Mobile's 600MHz build is likely to create margin pressure, but its increased scale will result in an even greater positive impact to margins, the analyst said. On the other hand, Sprint's increased capital investments will pressure service gross margins, especially if its subscriber growth slows down, Nispel said. 

Price Action

Shares of T-Mobile gained 10 percent in 2017 while Sprint's stock lost 30 percent.

Related Links:

What To Do With Sprint, T-Mobile Now That A Merger's Off The Table

T-Mobile's 'Netflix On Us' Initiative Isn't Enough To Warrant An Upgrade From Deutsche Bank

Latest Ratings for S

DateFirmActionFromTo
Jul 2019UpgradesNeutralBuy
Apr 2019DowngradesOutperformMarket Perform
Jun 2018UpgradesMarket PerformOutperform

View More Analyst Ratings for S
View the Latest Analyst Ratings

Posted-In: Brandon Nispel KeyBanc Capital Markets smartphones unlimited dataAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

 

Related Articles (S + TMUS)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ELMDDougherty & Co.Initiates Coverage On12.0
MRNSCantor FitzgeraldAssumes7.0
MNRLCapital One FinancialInitiates Coverage On23.0
SONVertical GroupUpgrades
UNPMorgan StanleyMaintains136.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Benzinga's Top Upgrades, Downgrades For January 2, 2018

Benzinga Pro's 4 Stocks To Watch Today