On Friday, T-Mobile US (NASDAQ:TMUS) shares saw its price target increased to $185.00, up from the previous $175.00, by KeyBanc, with the firm maintaining an Overweight rating.
The revision follows T-Mobile's recent financial performance which, according to the firm, presented a mix of outcomes with service revenue coming in slightly below expectations, but adjusted EBITDA outperforming due to better expense management.
KeyBanc's decision to maintain the Overweight rating and raise estimates is based on the belief that T-Mobile's announcement regarding "rate plan optimization" will likely enhance growth and have a negligible effect on customer churn, given the current low upgrade and churn environment. The firm also expressed confidence that T-Mobile's guidance for 2024 is not only achievable but may also present potential upside.
Regarding T-Mobile's fiber ambitions, KeyBanc sees both positive and negative aspects, ultimately assessing the impact on T-Mobile as neutral, and only a modest negative for the cable industry. The firm emphasized T-Mobile's sustained advantage in the 5G network space, predicting that this would continue to attract subscribers.
KeyBanc highlighted T-Mobile's prospects for high-speed data (HSD) EBITDA growth and double-digit free cash flow (FCF) growth. The firm anticipates that the generated cash flow will be returned to shareholders. Given T-Mobile's current valuation, which KeyBanc considers relatively inexpensive given its growth, the firm expects the stock to have further upside potential.
InvestingPro Insights
Following KeyBanc's positive outlook on T-Mobile US (NASDAQ:TMUS), the InvestingPro platform provides additional insights that may interest investors. T-Mobile's management has been proactively repurchasing shares, which often signals confidence in the company's future prospects. Additionally, T-Mobile is recognized as a prominent player in the Wireless Telecommunication Services industry, which may contribute to its competitive edge and potential for continued growth.
From a financial standpoint, TMUS has a market capitalization of $194.71 billion, with a solid P/E ratio of 23.4, reflecting investor confidence in its earnings capacity. The company's P/E ratio adjusted for the last twelve months as of Q1 2024 is even more appealing at 19.55. Moreover, TMUS's gross profit margin for the same period stands at an impressive 63.26%, underscoring its ability to maintain profitability.
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