T-Mobile US, Inc. (NASDAQ: TMUS) has proven its stability during the first half of the 2021 fiscal year and reported better than expected second-quarter earnings results in July. Despite this, T-Mobile US shares have weakened more than 9% since the beginning of August 2021, and the current share price stands around $131.
Fundamental analysis: KeyBanc Capital Markets downgraded T-Mobile shares
T-Mobile US is an American wireless network operator that has entered aggressively into the Home Internet segment, and it has plans to cover more than 50% of US households within six years. In July, the company reported better than expected second-quarter results; total revenue has increased by 13.2% Y/Y to $20 billion, while the GAAP EPS was $0.78 (beats by $0.29).
Total revenue has increased above expectations (beats by $610 million), and it is important to mention that net cash provided by operating activities increased $3.0 billion year-over-year to $3.8 billion. The core adjusted EBITDA for the second quarter grew 7% on a yearly basis to $6 billion, and the company raised its outlook for the 2021 fiscal year.
The second-quarter earnings results showed that T-Mobile US is moving in the right direction; still, KeyBanc Capital Markets downgraded T-Mobile from “overweight” to “sector weight.”
“T-Mobile’s “brand and improved network took remarkable postpaid mobility market share between 2015-2021,” but the company’s wireless service revenue growth isn’t materially better than peers despite the premium valuation. The bull case that “rural and enterprise are the next leg of the subscriber growth story” is already priced into the current valuation, said Brandon Nispel, an analyst from KeyBanc Capital Markets.
Another negative news is that shares from an unknown seller are being offered at a discount of 2% to 2.7% on the stock this week. The unknown seller has offered a block trade of 12.5 million shares through J.P. Morgan, which negatively influenced the stock price.
Fundamentally looking, T-Mobile US trades at less than seven times TTM EBITDA, and with a market capitalization of $167 billion, shares of this company are fairly valued. T-Mobile is in a good position to grow its business, but if the US stock market enters a more significant correction phase, the share price could be at much lower levels.
Technical analysis: T-Mobile shares have weakened more than 10% from their recent highs
T-Mobile shares have weakened more than 10% from their recent highs registered in July, and if the price falls below $120 support, it would be a strong “sell” signal. On the other side, if the price jumps above $135, it would be a signal to buy shares, and the next target could be around $140.
Summary
T-Mobile US reported better than expected second-quarter results in July; still, KeyBanc Capital Markets downgraded T-Mobile and reported that lots of positive expectations have already been included in the stock price. T-Mobile shares have weakened more than 10% from their recent highs registered in July but, if the price jumps above $135, the next target could be around $140.
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