T-Mobile stock analysis: short-term pullback can’t be ruled out

T-Mobile (TMUS) has been the best-performing US telecom stock in the past five years, soaring by over 174%. In the same period, AT&T and Comcast rose by 7.50% and 4.35% respectively, while Verizon dropped by 3%.

The same strong performance has continued this year, with its total return rising to 31.35% while AT&T and Verizon have jumped by 36% and 23%. 

T-Mobile’s financials

T-Mobile’s stock performance happened as the company continued growing its market share in the wireless telecom industry, where it has about 30% share. Most of these gains happened after its $26 billion merger with Sprint in 2020. 

Read more: T-Mobile announces a $4.4 billion deal with U.S. Cellular

Since then, its annual revenue has done modestly well. It had an annual revenue of $45 billion in 2018, which rose to $68 billion in the following year. Last year, T-Mobile had an annual revenue of over $78.5 billion, and it is expected to continue growing. 

T-Mobile’s annual profit has also grown, helping it reduce its share count from over 1.24 billion in 2021 to 1.16 billion today. It has also continued to grow its dividend payouts to investors.

The challenge for T-Mobile and other telecom companies, however, has been that their heavy investments on 5G have yet to pay off. Data shows that its capital expenditure on 5G has been over $20 billion.

To a large extent, all the promises made about 5G have yet to work out as expected. Sure, people have received faster download and streaming speeds, which users had in the last generation.

Recently, however, T-Mobile has focused on artificial intelligence by teaming up with Nvidia and OpenAI. Its OpenAI partnership will produce IntentCX, an “intent-driven AI decisioning platform.” 

The platform aims to help reduce support calls by 75% while improving customer service. It will also help companies reduce their customer service workers and the associated costs in the long term. Still, this platform should be taken with a grain of salt as such solutions exist today.

T-Mobile has also teamed up with Nvidia, Ericsson, and Nokia to create a new innovation center focused on Nvidia’s supercomputer. The goal is to ensure that T-Mobile enhances its Radio Access Network (RAN) with AI. In a statement, T-Mobile’s CEO said:

“AI-RAN at T-Mobile will be all about unlocking the massive capacity and performance that customers increasingly demand from mobile networks. AI-RAN has tremendous potential to transform the future of mobile networks completely.”

Read more: T-Mobile (TMUS) stock is beating Verizon, AT&T: still a buy?

T-Mobile earnings ahead

The next important catalyst for the T-Mobile stock price will be its quarterly earnings scheduled on October 23. 

In its last earnings report, the company said that it added 301k postpaid customers, a big increase from the 299k it added in the same quarter last year. 

Service revenues rose by 4% to $16.4 billion, while its postpaid figure jumped by 7% to $12.9 billion. Also, its profitability continued growing, with the net income by 32% to $2.9 billion. 

T-Mobile also continued to return funds to its shareholders, repurchasing 14 million shares for $2.3 billion. It has repurchased $22.1 billion worth of shares and paid dividends worth $8.7 billion.

Analysts expect the upcoming results to show that its revenue rose by 4.10% in the third quarter to $20.04 billion. Its forward guidance for the fourth-quarter revenues will be $21.40 billion. The annual revenue guidance will be $80.8 billion followed by $84.60 billion next year. 

Most analysts have a bullish view of the T-Mobile stock, with 23 of the 30 following it having a buy rating. 6 of them have a hold rating, while the average estimate is $215, higher than the current $208.

T-Mobile stock price analysis

TMUS chart by TradingView

The weekly chart shows that the TMUS share price has been in a strong bull run for a long time. It crossed the important resistance point at $152.12 in December. That was an important level since it was the highest point in October 2022.

The stock has remained above the 50-week and 100-week Exponential Moving Averages (EMA). This is a sign that bulls are in control. The Relative Strength Index (RSI) and the MACD have been in a strong uptrend.

Therefore, the T-Mobile stock price will continue rising as bulls target the next key point at $220. However, with the stock being in an overbought level, there is a risk of a short-term pullback ahead or after its earnings.