T-Mobile US (TMUS) stock has drifted lower recently, slipping 2% over the past week and down 12% so far this year. Investors are weighing its current valuation following a multi-year rally built on wireless subscriber growth.
Shares have come under pressure as the recent selloff takes hold, with the 1-year total shareholder return now negative at nearly -12%. Momentum is clearly fading after several years of outperformance. While the company delivered strong multi-year returns of 38% and 63% for three- and five-year total shareholder return respectively, the current pullback suggests investors are reassessing T-Mobile’s valuation in light of cooling growth and shifting market sentiment.
With shares down notably from their highs and a sizeable gap to analyst price targets, the key question becomes clear: is T-Mobile now attractively undervalued, or is the market simply factoring in all the company’s future growth?
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Most Popular Narrative: 27% Undervalued
According to the most popular analyst narrative, T-Mobile US's fair value sits at $275 per share, which is well above its last closing price of $201. This valuation relies on optimistic assumptions about future growth and profit expansion and highlights what analysts see as T-Mobile’s main catalysts for outperformance.
Innovations such as the rollout of 5G Advanced and T-Satellite, along with enhancements in digital platforms like T-Life, point to operational improvements that could drive margin expansion and future earnings growth.
Want to know the secrets behind this bullish price target? Bold projections for growth, profitability, and margins form the core of this narrative. Which numbers do analysts believe will push T-Mobile to new highs? The details might surprise you, so uncover what’s driving these lofty assumptions.
However, unexpected tariffs on handsets or aggressive competitor promotions could quickly undermine the bullish outlook and put pressure on T-Mobile’s future growth trajectory.
Another View: Market Multiples Tell a Different Story
While the main narrative leans bullish, looking at the price-to-earnings ratio presents a more cautious view. T-Mobile is trading at 18.9 times earnings, which is higher than the industry average of 18.3 and the peer average of just 7.3. Compared to a fair ratio of 16.4, this suggests the stock may be on the expensive side. Could this be a sign that expectations are already baked in?
Keep in mind, if you see things differently or want to build your case, it takes just a few minutes to put together your own perspective. Do it your way
A great starting point for your T-Mobile US research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.
Valuation is complex, but we're here to simplify it.
Discover if T-Mobile US might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
