T-Mobile, Another Tech Winner You Need To Own

The Gateway To Digital, Connecting The World

Before I get into the details of T-Mobile’s (NASDAQ:TMUS) report I want you to think about this. T-Mobile is a pure-play on connectivity. In the post-pandemic world, the shift to digital is accelerating because digital is the #1 way to social-distance. Businesses and consumers are turning toward digital to connect and guess who’s standing in between? You got it, wireless providers like T-Mobile. I’ve said it before, if in reference to a different sector/industry, but it pays to be the middle man. The bottom line, T-Mobile is another tech winner you need to own.

T-Mobile Misses On The Top And Bottom Line, So What

The headline figures are bad, but only because of spin. The company missed consensus targets on the top and bottom line but there are so many mitigating factors it’s hard to know where to start. Beginning with the top line, revenue fell short but only by $50 million or about 0.2%. That’s not a big miss for any company but when you consider the fact net revenue, post-merger with Sprint, grew by 60.9% it becomes virtually meaningless.

On the bottom line GAAP EPS missed by a much larger margin, $0.10 or over 50%. The mitigating factor is that on an adjusted level, earnings before items, taxes, deductions, and adjustments came in at $7.0 billion and well above consensus. The analysts had been looking for closer to $6.11 billion which is even lower than the company’s own $6.2 billion target.

The results are driven by strong subscriber growth that points to ongoing strength in the coming quarters. Net subscriber add-ons topped 1.245 million to set an industry high, more than 1.110 million or 89.3% of those are post-paid users. The salient point is that now, with over 98.3 million customers it is serving more customers than AT&T(NYSE:T) and trails only Verizon (NYSE:VZ).

Looking forward, the company issued guidance that is well above the consensus. T-Mobile is looking for net subscriber add-ons, revenue, and earnings to moderate but only to $32.8 billion in the 2nd half from about $35 billion in the 1st. The takeaways for investors are that negative impairments to GAAP and non-GAAP earnings associated with the merger will decline thus improving the company’s earnings, free-cash-flow, and balance sheet.

Don’t Forget About The 5-G Factor, T-Mobile Is The Winner

T-Mobile is a leader when it comes to 5-G. The 5G roll-out is already underway and T-Mobile is dominating with the largest network, covering more than 7,500 cities, and double the second-largest operator AT&T. A report from OpenSignal, an independent rating agency, ranks T-Mobile first for 5G availability stating its customers get a signal more than twice as often as AT&T customers and 56X more often than Verizon customers. In a segment expected to grow by high-double-digits over the next five to ten years that is saying a lot.

The Technical Outlook: T-Mobile Is In Rally Mode

Shares of T-Mobile have been in a sustained uptrend for many years. The stock was, in fact, accelerating that trend in anticipation of 5G and merger prior to the pandemic. The pandemic caused a hiccup in price action that can only now be described as one fantastic buying opportunity. Now, today, price action is up another 8% and confirming that yes indeed this trend is still intact.

I’m going to be honest here, I don’t like chasing prices especially when they pop this much but waiting for a pullback might be a mistake. The outlook for this company is robust, no doubt about it. If you doubt T-Mobile will become the #1 mobile carrier let me refer you back to the 5G data. It may take time, we’re still early in the game, but T-Mobile is positioned to dominate this market, assuming of course they keep up with their plans for expanding 5G. Investors who want a piece of this action may want to make a small purchase now and hold some capital in reserve for the next opportunity.