Wireless carriers suffered through a difficult year in 2017 as they continue to pour cash into their 5G networks, However, at least one Wall Street analyst says T-Mobile US Inc (Nasdaq: TMUS) will continue to be a market leader in 2018.
KeyBanc analyst Brandon Nispel says there should be several positive catalysts for the “Big Four” providers in the next year, and T-Mobile is in the best position to capitalize. T-Mobile was the only one of the big four carriers to deliver a gain for investors in 2017, returning 11 percent on the year. Verizon Communications Inc ( VZ) stock declined 0.9 percent, AT&T ( T) shares fell 9.5 percent and Sprint Corp. ( S) stock tumbled 29.6 percent.
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According to Nispel, U.S. corporate tax cuts, an uptick in GDP growth and net neutrality deregulation should help improve investor sentiment toward carrier stocks in the coming year. In addition, he says an expansion of home broadband services could help significantly expand the market for carriers.
“We believe over the next three to five years the number of broadband homes passed by wireless carriers could double and lead to higher broadband market share,” Nispel says.
From a fundamental standpoint, Nispel says T-Mobile is the best bet for investors among the major telecommunication companies.
“We see competitive intensity moderating, which, combined with expanded distribution, supports our expectation for continued strength in postpaid subscriber net additions as the brand continues to resonate with consumers,” he says.
T-Mobile recently announced a massive $1.5 billion commitment to share repurchases in 2018. Deutsche Telekom, which holds a 64 percent ownership stake in T-Mobile, also said it was considering purchasing more T-Mobile shares. T-Mobile has plenty of cash on its balance sheet at the moment after a rumored buyout of Sprint was never completed.
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On the other end of the spectrum, Nispel says T-Mobile’s jilted partner Sprint will be the laggard of the group. He says rising promotional costs, a higher churn rate and more capital spending will weigh on free cash flow in the near-term.
KeyBanc has an “overweight” rating and $76 price target for TMUS stock.
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T-Mobile US Inc (TMUS) Stock Is the Cream of the Carrier Crop originally appeared on usnews.com
