By Emily Dattilo
T-Mobile shares have had quite the run, but it's time to wait for a better opportunity to buy, Scotiabank Global Equity Research argued on Friday.
Analysts Maher Yaghi and Joey Chan downgraded shares of the telecom company to Sector Perform from Sector Outperform but raised their price target to $236 from $215.50.
T-Mobile stock fell 0.2% to $221.50 in premarket trading.
"The medium term outlook for TMUS continues to be impressive with continuation of leading wireless subscriber loading, service revenue growth, and FCF [free cash flow] growth compared to US peers," the analysts wrote.
The team expects the company to report that it added a net 700,000 postpaid phone subscribers in its latest quarter, with growth of 6.5% in earnings before interest, tax, depreciation, and amortization, and free cash flow of $4.7 billion.
Free cash flow is a pivotal reason the stock trades at a higher ratio of enterprise value to Ebitda than its peers, the analysts said. T-Mobile should be able to generate free cash flow of around 53% of Ebitda in 2025, much higher than the ratios of about 38% to 39% for Verizon Communications, AT&T, and Comcast.
And they say T-Mobile can maintain that ratio.
"That said, and given the significant stock performance in the last months for what is still inherently a telecom company, we believe that short term upside might be limited at this point, especially post the company's analyst day which generated positive momentum," analysts added.
Through Thursday's close, T-Mobile shares have gained 38% this year, dwarfing competitors' returns. Verizon has increased 16%, AT&T is up 30%, and Comcast has dropped about 4%.
Write to Emily Dattilo at emily.dattilo@dowjones.com
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October 18, 2024 09:21 ET (13:21 GMT)
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