T-Mobile Stock Gets a Downgrade. Its Valuation Is 'Stretched.' -- Barrons.com

Dow Jones12-13

By Tae Kim

After a big rally in T-Mobile's stock price, KeyBanc Capital Markets said investors can find better opportunities elsewhere.

On Wednesday, analyst Brandon Nispel lowered his rating for T-Mobile shares to Sector Weight from Overweight. He doesn't have a price target for the company.

"We downgrade T-Mobile based on valuation, which we think has become stretched," he said. "Going forward, the competitive environment feels as if it is shifting toward a converged offering."

What the analyst means is T-Mobile has started acquiring residential internet access businesses to supplement its mobile wireless offerings, which is a more uncertain market.

T-Mobile shares fell 0.5% to $233.26 in midday trading Thursday. The S&P 500 was down 0.2%.

Nispel notes T-Mobile trades at 9.3 times his 2026 forecast for earnings before interest, taxes, depreciation, and amortization, or Ebitda, versus the 6.3 times three-year average of its two main rivals -- AT&T and Verizon.

"We expect FCF [free cash flow] growth to slow due to higher capital spending and cash taxes," he wrote. "With the stock trading at a meaningful premium to peers, we think there are more attractive alternatives."

T-Mobile stock is up 45% so far this year, compared with a 33% rise for the Nasdaq Composite.

Write to Tae Kim at tae.kim@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 12, 2024 12:24 ET (17:24 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.

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