Tmobile Going Out Of Business
Tmobile Going Out Of Business – I’m reviewing my first and second quarter theses on T-Mobile (NASDAQ:TMUS) ahead of third quarter results, which will be released premarket on Wednesday, October 25.
Today, T-Mobile is almost $140 with next week’s earnings. On Wall Street, my analyst friends are looking for alpha, and quantitative ratings are largely bullish on stocks.
Tmobile Going Out Of Business
What I continue to see is that T-Mobile is better positioned than AT&T (T) and Verizon (VZ) in today’s market. While I totally agree with this position, it doesn’t mean T-Mobile represents fair value at its current price.
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I’m still not convinced there’s any positive potential here. Receiving negative signals from second quarter results, mixed earnings revisions and a further increase in valuation ratios, I maintain my rating on T-Mobile, with shareholder return commitments offsetting the downside risks associated with a competitive environment.
First, on August 24, T-Mobile announced plans to lay off 7% of its workforce. While this is an increase in profitability in the short term, it shows me that management cares about the ability to generate top-line growth.
Then, on September 6, T-Mobile announced plans to return $19 billion to shareholders. This is obviously good for short-term returns, cash flow and stock price positioning. However, this suggests that management has failed to identify meaningful investment opportunities.
The same day, CEO Mike Siewert said in a speech at the Goldman Sachs Technology Conference that the industry is more competitive than ever with increased competition.
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Finally, the accounting director and the head of the consumer group both sold most of their shares in mid-September, at between $140 and $142.
Overall, I believe management has shown a fair assessment of overstated earnings. This is consistent with the valuation multiple, which has increased since the second quarter.
T-Mobile is expected to report EPS of $1.89 and revenue of $19.37 billion, keeping it on track with the full-year guidance announced in the second quarter results .
T-Mobile has a long EPS winning streak, but has had more mixed results in earnings, missing about two-thirds of the time.
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Based on management signals, I expect EPS to be at or above consensus, but revenue to be at or below consensus. This builds on the focus on costs announced in August, offset by a challenging pricing environment.
In addition to directional signals, analysts have revised their quarterly estimates over the past 90 days.
Revisions for the full year were more mixed, with 4 upward and 4 downward revisions for EPS. The results had 1 upward revision and 22 downward revisions.
Shares rose after announcing a $19 billion return to shareholders in early September. Since the announcement, it has largely remained around $140.
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Given the valuation of the above items and the shareholder return commitments until 2024, I also do not expect any significant movement after the announcement of unexpected changes in the financial situation.
My first focus after the earnings release will be T-Mobile’s pricing power. I remain concerned that frustrated AT&T and Verizon, along with a growing value segment, will force T-Mobile to compete on price to maintain market share.
As noted in my Q2 analysis, in its Q2 2023 earnings presentation, T-Mobile reported that postpaid ARPU was relatively flat, only increasing from $48.69 to $48.73, due to of “higher advertising activity”. What’s concerning is that the prepaid ARPU increased from $38.95 to $37.98, and T-Mobile had no comment.
To achieve long-term success, T-Mobile must increase its pricing power while retaining or growing its customer base. Higher price strength may prompt me to buy, while lower price strength may prompt me to sell.
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I will also focus on other management signals regarding the competitive environment, such as discussion of promotional activities, prepaid and postpaid performance, and possible challenges from AT&T and Verizon.
Finally, I would look for any changes in earnings guidance following an upward revision in the second quarter and any changes that occur during the third quarter. Specifically, does the company believe it can maintain its earnings guidance regardless of the benefits of EPS-related cost savings?
While I don’t expect Q3 earnings to change significantly given the $19 billion return commitment, I will be looking for an indication of future performance.
To ensure T-Mobile’s long-term success, I believe the company must effectively balance its pricing power with maintaining or growing its customer base. Any change in this delicate balance will affect my investment recommendations.
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Based on the factors above, my current recommendation for T-Mobile is “Hold.” Before suggesting a position change, I will closely monitor future earnings announcements and any signals from management regarding the competitive environment.
Michael (Mike) Dion is an FP&A, corporate finance and small business expert who has spent the last 12 years working at Fortune 100 companies, building startup finance and accounting departments, advising small businesses and, as a board member, he guided non-profit organizations. . He has financial experience in various sectors including telecommunications, media and entertainment, hospitality and construction. He founded F9 Finance, a website that helps finance professionals accelerate their careers. and simplify financial and accounting concepts to make them easier to understand and accessible to professionals and small business owners. His investment approach draws inspiration from Fortune 100 and small business experience. It looks for value opportunities where other investors overreact to bad news or underreact to good news, always supported by strong fundamentals and preferably dividends. Cash flow isn’t just king for businesses. Important for investors at all levels.
Analyst Disclosure: I or we have a profitable long position in VZ stock through ownership, options or other derivatives. I wrote this article myself and it expresses my opinion. I received no compensation for this (other than Alpha Search). I have no business relationship with any of the companies whose stock is mentioned in this article.
Look for Alpha Exposure: Past performance is no guarantee of future results. No advice or recommendation is given as to whether any investment is suitable for any particular investor. The views or opinions expressed above may not reflect the views of Alpha Search as a whole. Seeking Alpha is not a licensed U.S. securities broker-dealer, investment advisor, or investment bank. Our analysts are third-party authors who include professional investors and individual investors who may not be licensed or endorsed by any institution or regulatory body.
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I’m sure many people will miss the opportunity to opt out and will be devastated when they see their new bill. I feel bad for the CS rep.
After 10 years of using T-mobile, I switched to Verizon last August. I received their latest package, a BYOD discount of $15 per line and gave my wife a free iPhone at 2pm with a 1pm exchange with a broken camera. In total, I pay $9 more per month than T-mobile for the new Verizon plan and get free NFLSunday subscriptions… On T-mobile, I’m still on the old ONE plan. ..upgrading to the new plan would cost me $90-$100 more per month.
I guess you can add to it by calling and unsubscribing. Then there will be an option in your account to prevent migration to a newer plan.
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Bigjnyc said: I’m sure a lot of people will miss the option to unsubscribe and it will be a disaster when they see their new bill. I feel bad for the CS rep. Click to expand… This was mentioned yesterday on the T-Mobile Reddit. Speculation is that T-Mobile is expecting this. Anyone who doesn’t pay attention to their account.
Chuckee said: Oh, here we go again. I switched to T-Mobile when Verizon tried the same thing a few years ago. I switched to Verizon when AT&T tried the same thing a few years ago. Click to enlarge…
Best solution: When a salesperson mistreats someone, hold them accountable. With so many cell phone service provider choices, some may be “locked out” for life.
I had a bad experience with American Airlines. They chose to “maximize profits” rather than do the right thing for a plane full of people, including me. I still struggle – about 12 years later – to not fly American Airlines, including overpaying my competitors for certain flights so that it doesn’t generate new revenue for AA.
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When I was young, some banks started charging for “very small” accounts… which – when I was young – were usually the size of a regular account. I abandoned that bank because of this problem and now – years later and with more cash (and therefore more desirable banking customers) – I still try very hard to never do business with them… even if they are the only ones. several banks in certain transactions. .
If enough users “punish” the offending user with ACTION, the seller will learn to change or eventually be replaced. Unfortunately, too many users “just pay” or switch
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