T-Mobile's Network Advantages and Customer Momentum Bolster Investment Thesis, Analyst Says

Benchmark analyst Matthew Harrigan reiterated T-Mobile US Inc TMUS with a Buy and a $200 price target.

The analyst continues to regard T-Mobile as a relative haven if the current equity rally reverses, and it is also not subject to the lead sheath cable overhang affecting Version and AT&T. 

Harrigan saw nothing in yesterday’s 2Q23 Verizon Communications Inc VZ release and conference call that disrupts his T-Mobile investment thesis. 

Customer momentum and long-term pricing should continue to benefit from the twin attributes of a better network and superior value perception. 

T-Mobile is now rolling out nationwide four-carrier aggregation for 5G, enabling peak speeds topping 3.3 Gbps. The first enabled device is the Samsung Galaxy S23 device. T-Mobile should benefit from additional C-band, a denser macro cell grid with 80K sites, and the ability to layer on the most spectrum for the most advanced 5G offering. 

T-Mobile continues gaining traction in smaller and mid-sized markets and corporate, complementing improved brand and network perception in urban areas. Small and mid-sized DMA marketing reach is now at two-thirds of U.S. smaller markets or 50 million households with 140 million people. 

The newest locations are where T-Mobile has significant network advantages compared to other carriers. 

Benchmark’s sensitivity analysis pivoting off urban/small and mid-sized market/corporate customer growth through 2026 and ARPA improvements suggest fair price potential could be decidedly above $225 in a more benign economy and equity market. 

Harrigan looked for 2Q23 2.0% service revenue growth to $15.622 billion, with sales inclusive of lower equipment and leasing activity off 1.2% to $19.463 billion. Core EBITDA is estimated to be up 9.4% to $7.240 billion. 

The analyst anticipates 1.425 million postpaid net customers adds with 698K postpaid phone adds. 

Immediate APRU and ARPU momentum is likely dampened by price increase timing, with the long-term path also affected by a higher share in the lower per-line price point enterprise market.

Price Actions: TMUS shares traded lower by 1.07% at $140.95 on the last check Wednesday.