T-Mobile has reported better-than-expected Q1 earnings, thanks to its acquisition of Sprint in 2020. While revenue remained flat at $19.59 billion, earnings were $2.00 per share. The carrier continues to lead the industry in postpaid phone net additions, adding 532,000 connections for the quarter. T-Mobile’s deployment of mid-band spectrum for 5G technology has allowed it to capture a higher share of industry net customer additions compared to rivals Verizon and AT&T.
With the excess spectrum acquired through the Sprint deal, T-Mobile has made inroads into the broadband market with its fixed wireless broadband offering. The company added 405,000 subscribers in the last quarter, bringing its total wireless broadband base to around 5 million customers. T-Mobile also plans to expand into the wired broadband space by purchasing Lumos, a fiber network operator, with the goal of growing its fiber network to 3.5 million connections by the end of 2028.
T-Mobile has seen improved profitability due to the decommissioning of legacy Sprint towers and the integration of the two networks. Free cash flow increased by 39% year-over-year to $3.3 billion in Q1. TMUS stock has seen gains of 20% since early January 2021, but its performance has been inconsistent over the years. While it underperformed the S&P 500 in 2021 and 2023, the stock has the potential to see a strong jump in the future, especially given the current macroeconomic environment with high oil prices and elevated interest rates.
Despite T-Mobile’s rich valuation compared to its peers on a price-to-earnings basis, the multiple is justified. The company has emerged as one of the best networks with wide and speedy coverage, enabling it to grow at a quicker pace than competitors. Free cash flows are projected to grow significantly in 2024, which could lead to margin improvement via the closure of the Sprint network. T-Mobile is valued at around $176 per share, about 7% ahead of the current market price. For more detailed analysis on T-Mobile’s valuation and revenue, investors can refer to Trefis Market Beating Portfolios and Trefis Price Estimates.
