On Thursday, BofA Securities increased its price target for T-Mobile US (NASDAQ:TMUS) to $240 from $220, while maintaining a Buy rating on the stock. The adjustment follows T-Mobile's third-quarter performance, which surpassed Wall Street's expectations in several key financial metrics.
T-Mobile reported third-quarter results that exceeded estimates for service revenue, adjusted EBITDA, free cash flow, and post-paid phone net additions. In response to the strong results, the company has revised its guidance upwards, with mid-point increases to adjusted EBITDA by $50 million, net cash from operations by $150 million, and free cash flow by $50 million.
The telecom giant's continued outperformance and momentum have prompted the analyst to revise the price objective. The new target is based on a price to forward free cash flow per share multiple of 14 times the 2025 estimate. This multiple is chosen to reflect T-Mobile's unique proposition for shareholder returns.
T-Mobile's commitment to shareholder value is highlighted by a three-year plan to return $50 billion through share buybacks and dividends. Additionally, the company has $20 billion in extra capacity to further enhance shareholder returns.
The analyst also noted T-Mobile's anticipated 8% growth in free cash flow per share for 2025 and a 1.6% yield, underscoring the company's strong financial position and promising outlook for investors.
In other recent news, T-Mobile US, Inc. is raising its full-year guidance for 2024, with postpaid net additions expected between 5.6 million and 5.8 million, and core adjusted EBITDA anticipated to be between $31.6 billion and $31.8 billion. The company's spectrum strategy includes a recent trade of 3.45 GHz for 2.5 GHz to enhance its 5G network.
T-Mobile's enterprise solutions saw significant growth with clients such as American Airlines (NASDAQ:AAL) and New York Life Insurance. These are recent developments that highlight T-Mobile's robust growth and strategic advancements.
InvestingPro Insights
T-Mobile's strong performance and BofA Securities' increased price target are further supported by recent data from InvestingPro. The company's market capitalization stands at an impressive $257.8 billion, reflecting its significant position in the wireless telecommunication services industry.
T-Mobile's financial health is evident in its robust revenue of $79.1 billion over the last twelve months as of Q2 2024, with a solid gross profit margin of 63.6%. This aligns with the company's strong third-quarter results mentioned in the article.
InvestingPro Tips highlight T-Mobile's financial strength and market position. The company has a perfect Piotroski Score of 9, indicating strong financial health. Additionally, T-Mobile is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.46, suggesting potential undervaluation despite its recent price increases.
The stock's strong performance is further emphasized by its 59.06% total return over the past year and its current trading near its 52-week high. These metrics support the analyst's optimistic outlook and increased price target.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for T-Mobile, providing a deeper understanding of the company's financial position and market potential.
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