T-Mobile US management is planning to host an investor day in the coming weeks, where it is expected to unveil new long-term sales and profit guidance.
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T-Mobile US had a busy 2020, winning a legal battle over its acquisition of Sprint, integrating the two companies and networks, transitioning to a new CEO, and jumping ahead in the 5G race. Continued industry-leading subscriber growth has come thanks to the brand’s competitive positioning and value pricing, plus an enviable spectrum position for the 5G era.
That growth, plus early signs of merger-related cost savings and greater efficiencies of scale, made its shares a popular pick on Wall Street in 2020: T-Mobile stock surged 72% in 2020, versus a 18% return including dividends for the S&P 500. Wireless rivals Verizon Communications (VZ) and AT&T (T) lost less than 1% and 21%, respectively, in 2020.
T-Mobile will report its fourth-quarter and full-year 2020 results on Thursday evening, and analysts don’t seem to know what to expect. A more promotional wireless market in the holiday period—plus the impact of pandemic and merger-integration-related costs in the quarter—add to the uncertainty.
Wall Street estimates for earnings per share range from 25 cents to 61 cents for the fourth quarter, with an average of 49 cents. That would compare with 87 cents in earnings per share for stand-alone T-Mobile in the same quarter a year earlier. Revenue is forecast to come in at $19.9 billion, versus $11.9 billion for pre-Sprint T-Mobile in the fourth quarter of 2019.
Here is a snapshot of Wall Street’s expectations and some recent history:
• Gaining access to Sprint’s wireless spectrum licenses was a key motivation for T-Mobile’s acquisition of its former competitor. Sprint had significant holdings of so-called mid-band spectrum, which offers an attractive trade-off between distance and capacity in 5G networks. Telecom industry investors and watchers are eagerly awaiting the results of the C-Band wireless spectrum auction, which concluded last month. Verizon and AT&T are expected to have spent tens of billions of dollars to narrow the mid-band spectrum gap with T-Mobile.
• Before and over the holidays, T-Mobile, AT&T, and Verizon all offered steep discounts on Apple’s (AAPL) new 5G-enabled iPhone models to win new subscribers, retain existing ones, and increase adoption of the new network technology. T-Mobile preannounced its subscriber performance for the fourth quarter in early January. The company added a net 1.6 million postpaid subscribers—wireless customers who receive a monthly bill—while analysts had been expecting about 1.5 million, on average. T-Mobile also said it signed up a net 84,000 prepaid subscribers last quarter, roughly matching Wall Street’s consensus estimate.
• In November, T-Mobile management guided for $6.5 billion to $6.6 billion in adjusted Ebitda—earnings before interest, taxes, depreciation, and amortization—in the fourth quarter. The Wall Street consensus estimate is right in the middle of that range.
• T-Mobile management is planning to host an investor day in the coming weeks—once C-Band spending has been made public—where it is expected to unveil new long-term sales and profit guidance. Updates on the company’s merger integration and 5G network build-out progress are also expected.
• T-Mobile’s third-quarter earnings, reported on Nov. 5, came in at $1.00 per share—topping even the most optimistic analyst’s estimate and the average of 45 cents a share. Revenues were $19.3 billion—about $1 billion ahead of the analyst consensus. But the results really shone on the subscriber front, with T-Mobile adding nearly 2 million postpaid subscribers and 56,000 prepaid subscribers, more than doubling the combined estimate. T-Mobile stock jumped 5.4% the following day, to a record.
• Wall Street analysts are overwhelmingly bullish on the stock, with 90% having a Buy or equivalent rating. Their average target price is $152.49, about 18% above the stock’s recent level of $129.25. Barron’s also recommended buying T-Mobile shares last January.
T-Mobile management will host a call with analysts at 4:30 p.m. ET on Thursday.
Write to Nicholas Jasinski at [email protected]
