T-Mobile US' Pricing Power Of 5G Is A Pivot Point, Analyst Says

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  • Benchmark analyst Matthew Harrigan reiterated a Buy on T-Mobile US, Inc TMUS and cut the price target to $197 from $205
  • The re-rating reflects pushing realization into 2023 even as TMUS continues to behave as a relatively safe haven even within a broad pan TMT perspective. 
  • The mild PT tweak is entirely attributable to revised market valuation parameters under his now 17x normalized Shiller P/E approach, implying the S&P 500 may drift around current levels, assuming a recessionary $215 in 2023 earnings. 
  • The weak economy augments TMUS’s value orientation appeal even as active switching is up YoY. 
  • T-Mobile’s ARPA and ARPU growth strategy relies on “self-selection” upselling to Magenta Max rather than naked price hikes. 
  • There is particular momentum for high-end handsets, especially Apple Inc AAPL iPhone 14, as Magenta MAX resonates with consumers. 
  • Cost inflation, a significant overall market concern, is controlled by having significant costs locked into long-term contracts. 
  • Furthermore, Mobile’s business plan does not include upside from mobile edge computing, private networks, and IoT off its 5G advantages. 
  • TMUS’ pricing power of 5G and consumer and business customer perception is a pivot point for TMUS stock price upside. 
  • Given TMUS’s moderate valuation relative to growth and business momentum, board approval for up to $14 billion in stock repurchases makes sense.  
  • Price Action: TMUS shares traded higher by 1.11% at $135.33 on the last check Tuesday.
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