T-Mobile Nears Intermediate Breakout
T-Mobile US Inc. (TMUS) is trading higher by less than 2% in Wednesday’s pre-market session after KeyBanc Capital Markets upgraded the stock to ‘Overweight’ from ‘Sector Weight’. The rally is setting off an important test at February resistance in the upper 120s, with a breakout signaling the next leg of an uptick that started near 100 in January. Notably, international tensions have barely affected the stock’s recent performance, with their domestic exposure acting as a safe haven for global-weary investors.
Long-term Competitive Advantage
The telecom giant’s profit margins are growing in a saturated smartphone environment while the Sprint acquisition is generating material cash flow. The company is leading rivals Verizon Communications Inc. (VZ) and AT&T Inc. (T) in 5G performance and availability, with that competitive advantage looking sustainable in the long-term. TMUS is also buying back stock at a healthy pace and could add another $60 billion in shares between 2023 and 2025.
Your capital is at risk
KeyBank analyst Brandon Nispel highlighted T-Mobile’s ‘best-in-class’ 5G rollout while noting “our August downgrade was based on the view that competition in wireless was increasing, expectations for growth were high, and valuation represented too substantial of a premium. While we still see the wireless market as increasingly competitive from cable, we believe the company should continue to take substantially more share than AT&T and Verizon.”
Wall Street and Technical Outlook
Wall Street consensus stands at a ‘Buy’ rating based upon 26 ‘Buy’, 1 ‘Overweight’, 3 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $106 to a Street-high $230 while the stock is set to open Wednesday’s session more than $35 below the median $165 target. This modest placement bodes well for continued upside in the second quarter, with a potential ramp-up into May’s Q1 2022 earnings release.
T-Mobile posted strong gains into February 2020, topping out at 101.35. It returned to that price level in May and broke out, carving a multiwave uptrend that hit an all-time high at 150.20 in July 2021. The subsequent decline sliced one-third off the stock’s value into the January 2022 low, ahead of a bounce that quickly reached 200-day moving average resistance. Recent price action has crisscrossed that contested level multiple times, with a breakout signaling a major improvement in technical tone.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.