KeyBanc Capital Markets downgraded T-Mobile US. Should I sell shares?

T-Mobile US, Inc. (NASDAQ: TMUS) has proven its stability during the first half of the 2021 fiscal year and reported better than expected second-quarter earnings results in July. Despite this, T-Mobile US shares have weakened more than 9% since the beginning of August 2021, and the current share price stands around $131.

Fundamental analysis: KeyBanc Capital Markets downgraded T-Mobile shares

T-Mobile US is an American wireless network operator that has entered aggressively into the Home Internet segment, and it has plans to cover more than 50% of US households within six years. In July, the company reported better than expected second-quarter results; total revenue has increased by 13.2% Y/Y to $20 billion, while the GAAP EPS was $0.78 (beats by $0.29).

Total revenue has increased above expectations (beats by $610 million), and it is important to mention that net cash provided by operating activities increased $3.0 billion year-over-year to $3.8 billion. The core adjusted EBITDA for the second quarter grew 7% on a yearly basis to $6 billion, and the company raised its outlook for the 2021 fiscal year.

The second-quarter earnings results showed that T-Mobile US is moving in the right direction; still, KeyBanc Capital Markets downgraded T-Mobile from "overweight" to "sector weight."

Another negative news is that shares from an unknown seller are being offered at a discount of 2% to 2.7% on the stock this week. The unknown seller has offered a block trade of 12.5 million shares through J.P. Morgan, which negatively influenced the stock price.

Fundamentally looking, T-Mobile US trades at less than seven times TTM EBITDA, and with a market capitalization of $167 billion, shares of this company are fairly valued. T-Mobile is in a good position to grow its business, but if the US stock market enters a more significant correction phase, the share price could be at much lower levels.

Technical analysis: T-Mobile shares have weakened more than 10% from their recent highs

T-Mobile shares have weakened more than 10% from their recent highs registered in July, and if the price falls below $120 support, it would be a strong "sell" signal. On the other side, if the price jumps above $135, it would be a signal to buy shares, and the next target could be around $140.

Summary

T-Mobile US reported better than expected second-quarter results in July; still, KeyBanc Capital Markets downgraded T-Mobile and reported that lots of positive expectations have already been included in the stock price. T-Mobile shares have weakened more than 10% from their recent highs registered in July but, if the price jumps above $135, the next target could be around $140.