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T-Mobile and Sprint Face Merger Hurdle

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The $26.5 billion proposed merger agreement between T-Mobile (TMUS) and Sprint (S) is still pending. The merger was announced in April 2018.

On Monday, T-Mobile stock fell 1.07% to $78.68 as of 11:48 AM ET. Earlier today, Barclays lowered its 12-month target price on T-Mobile stock from $93 to $88. The stock closed trading at $79.53 on October 11 and had a value of $67.95 billion. Barclays’ target indicates a 10.7% rise in the current price.

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Barclays analyst Kannan Venkateshwar maintained his “overweight” rating on the stock, according to The Fly. The Fly reported that the analyst lowered the target price on T-Mobile stock “due to lower deal probability as a result of the states’ lawsuit.” Venkateshwar also lowered the 12-month target price on Sprint stock from $8 to $6.

T-Mobile’s target price

Analysts are bullish on T-Mobile. As of October 11, 16 analysts recommend a “buy,” while four recommend a “hold.” None of the analysts recommend a “sell” rating for the stock. Analysts’ mean target price on T-Mobile stock is $88.17. The target price implies a 10.9% upside from the stock’s last closing price.

As of October 11, AT&T (T) and Sprint are rated as a “buy” by 14 out of 28 and one out of 18 analysts, respectively. Sprint’s target price of $6.65 implies an upside of 3.6%, while AT&T’s target price of $36.52 implies a downside of 2.8%.

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T-Mobile and Sprint merger lawsuit

In July, the Department of Justice approved the merger deal. However, the combined entity has to divest some of its wireless assets to Dish Network (DISH). The merger agreement is still waiting for official approval from the FCC.

The T-Mobile and Sprint merger deal faces a multistate lawsuit led by New York and California. The lawsuit intends to stop the merger. Currently, about 16 states want to block the merger. The lawsuit alleges that the merger could reduce competition and raise wireless prices for consumers. Critics think that the megamerger could also harm innovation and retail jobs. The court trial is scheduled to start on December 9.

Mississippi supports T-Mobile and Sprint merger

On October 9, Mississippi Attorney General Jim Hood left the multistate lawsuit. Now, the state supports the merger deal. On October 11, T-Mobile stock rose about 1.6%. There were reports that more state attorneys general might leave the lawsuit. Earlier this month, Florida supported the merger deal. T-Mobile and Sprint agreed to certain commitments that benefit the state.

According to a FierceWireless report on October 11, New Street Research analyst Blair Levin wrote in a note to clients that “Mississippi presents something of a unique case … as a preliminary matter, we note that Mississippi got an even worse deal than Florida and arguably worse than what the FCC negotiated for the nation as a whole.” He also said, “Florida got marginally better 5G coverage requirements than the FCC on a variety of metrics… Our point is that this deal, on its face, is not likely to cause any jealously in the hearts of policy makers in California, New York or the other more populous and wealthier states that remain in the litigation.”

Wells Fargo Securities analyst Jennifer Fritzsche thinks that the merger deal could face a court trial in December unless a settlement is reached with New York. The multistate lawsuit started in New York.

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Stock performance

Currently, T-Mobile stock is trading 6.7% lower than its 52-week high of $85.22. The stock is trading 32.6% higher than its 52-week low of $59.96. On October 11, Sprint stock closed 2.4% higher at $6.42, while AT&T stock closed 0.43% higher at $37.58.

T-Mobile stock has gained 25.0% YTD (year-to-date). AT&T has risen 31.7%, while Sprint has risen 10.3% YTD.

T-Mobile’s 14-day relative strength index score was 55.30. The score shows that the stock isn’t oversold or overbought.

T-Mobile has an upper Bollinger Band level of $81.30. The company’s middle Bollinger Band level is $78.86, while its lower Bollinger Band level is $76.43. On October 11, T-Mobile stock closed near its middle Bollinger Band level, which indicates that it isn’t oversold or overbought.

T-Mobile will likely post its third-quarter results on October 28. The company will likely report an adjusted EPS of $0.95, which would represent a rise of 2.2% on a YoY (year-over-year) basis. Meanwhile, analysts expect T-Mobile’s total revenues to increase  4.5% YoY to $11.3 billion in the September quarter.

Read T-Mobile and Sprint Merger: What Could Happen? and T-Mobile-Sprint Merger: Antitrust Concerns Gain Ground to learn more. Also, check out Where T-Mobile Stock Could Be Heading Now.

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