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Why Is T-Mobile Stock Falling Today?

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Oct. 29 2019, Published 2:05 p.m. ET

T-Mobile (TMUS) stock fell 2.6% in today’s trading session at 9:48 AM EDT. TMUS stock fell after the company reported its Q3 earnings after the market bell on October 28. The telecom company missed Wall Street’s revenue expectations, while its earnings beat expectations. T-Mobile’s adjusted EPS rose 8.6% YoY (year-over-year) to $1.01 in the third quarter, which beat analysts’ estimate of $0.96.

T-Mobile reported revenues of $11.1 billion in the third quarter, which implied a 2.0% rise on a YoY basis. However, the company’s revenues were lower than Wall Street’s expectations.

In the third quarter, T-Mobile’s revenues were approximately $264 million lower than expected. In the third quarter of 2018, the wireless carrier reported revenues of $10.8 billion. T-Mobile reported revenues of $11.0 billion in the second quarter.

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Customer growth

In the third quarter, T-Mobile gained 1.07 million net postpaid subscribers, which includes 754,000 postpaid phone subscriber net additions. This was more than analysts’ expectation of 743,000 net additions. The company also added 62,000 prepaid net customers.

T-Mobile reported a branded postpaid phone churn rate of 0.89% in the third quarter, which was lower than its churn rate of 1.02% in the third quarter of 2018.

T-Mobile–Sprint merger

The $26.5 billion merger agreement announced last year between T-Mobile and Sprint (S) is still pending. The merger deal faces a multistate lawsuit filed to block the combination on antitrust concerns. A court trial is set to begin in December.

CNBC reported that the Department of Justice and the Federal Communications Commission (or FCC) approved the merger deal. To learn more, see The T-Mobile-Sprint Merger: The End Is Near.

During the company’s third-quarter earnings conference call, T-Mobile CEO John Legere noted, “We feel very good and confident either in the process of a settlement or even going to trial and having the case seen well.”

T-Mobile expects to close its merger with Sprint early next year.

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T-Mobile’s updated outlook for 2019

T-Mobile raised and narrowed its postpaid net subscriber additions outlook for fiscal 2019 to the 4.1 million–4.3 million range from its previous guidance range of 3.5 million–4.0 million.

The company narrowed its adjusted EBITDA outlook for fiscal 2019 to $13.1 billion–$13.3 billion from its previous guidance range of $12.9 billion–$13.3 billion. The telecom company also expects its cash capex for fiscal 2019 to be $5.9 billion–$6.0 billion, excluding capitalized interest.

This year, Wall Street expects T-Mobile’s total revenue to rise 4.2% YoY to $45.1 billion from $43.3 billion, and its adjusted EPS to rise YoY to $3.97 from $3.36.

Peers’ performance

AT&T (T) also released its third-quarter earnings on October 28. The telecom company reported adjusted earnings per share of $0.94 in the third quarter, which was 4.4% higher than its adjusted EPS of $0.90 in the third quarter of 2018. Analysts expected AT&T to post adjusted EPS of $0.93 for the third quarter.

The company’s revenues fell 2.5% YoY to $44.6 billion, which missed analysts’ consensus estimate of $45.0 billion. The company added 101,000 postpaid phone net subscribers.

Sprint plans to report its earnings results for the September quarter on November 4. Analysts expect the fourth-largest wireless carrier in the US to post adjusted EPS of -$0.02 on revenue of $8.2 billion.

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T-Mobile: Ratings and target price

After T-Mobile’s third-quarter earnings release, RBC raised its target price on the stock to $94 from $87. SunTrust Robinson also raised its target price on the stock to $95 from $80. However, Cowen and Company reduced its price target on T-Mobile stock to $87 from $93.

Of the 21 analysts covering TMUS, 17 recommend a “buy,” and four recommend a “hold.” There were no “sell” recommendations. The analysts’ average 12-month target price of $89.79 implies a 9.0% rise from its October 28 price of $82.39.

Stock performance

On Monday, T-Mobile closed at $82.39. This was 3.3% lower than its 52-week high of $85.22 and 37.4% higher than its 52-week low of $59.96. The company has reported returns of 4.6% since the beginning of October. The company’s market cap is $70.4 billion.

Based on its closing price on Monday, T-Mobile stock was trading 3.2% above its 20-day moving average of $79.84. TMUS stock traded 4.1% above its 50-day moving average of $79.15 and 5.3% above its 100-day moving average of $78.21.

On a year-to-date basis on October 28, T-Mobile stock was up 29.5%. Its telecommunications peers Sprint and AT&T were up 8.6% and 34.9%, respectively, year-to-date.

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