New iPhone 16 to improve T-Mobile’s results?

T-Mobile is expected to publish its third quarter 2024 results at the end of October. Now, T-Mobile shares have done well, up about 35% this year, and outperforming Verizon shares, which are up about 22% over the same period. We expect T-Mobile’s earnings to come in at $2.44 per share, up more than 30% from last year, with revenue of $20.1 billion, up about 4% from last year and in line with consensus estimates. T-Mobile’s growth for the quarter will likely be driven by higher wireless service revenue, with migration to higher-priced 5G wireless phone plans and steady subscriber growth. See our analysis of T-Mobile profit example for more information on what to expect when the company reports earnings.

In the previous quarter, in the second quarter of 2024, T-Mobile led the industry in expanding its postpaid telephone network, with 777,000 connections. This was also a record for the company in the second quarter. We expect net additions to remain relatively strong in the third quarter as T-Mobile has captured a larger share of net customer additions in the US wireless industry, thanks to the deployment of valuable mid-band spectrum for 5G wireless technology. The mid-band spectrum offers a good balance between speed and coverage, compared to the millimeter wave spectrum – which offers ultra-fast speeds but weak coverage – where rivals Verizon and AT&T initially focused. Moreover, the launch of the iPhone 16 series in mid-September is also likely to help the company increase its subscriber base. T-Mobile has said that the iPhone 16 series outsold last year’s smartphones in its first week of sales, with customers increasingly opting for the high-end Pro and Pro Max devices. Additionally, the company’s price increases implemented earlier this year and a shift to premium subscriptions could boost revenue per user for the quarter. T-Mobile has also been steadily gaining ground in the broadband market with its fixed wireless broadband offering, leveraging the excess spectrum it acquired through the Sprint deal. Last quarter, the company added 406,000 subscribers, the best in the industry, bringing its total wireless broadband base to approximately 5.6 million customers. The airline is likely to continue to witness an improvement in profitability, led by the decommissioning of the old Sprint towers and the completion of the integration of the two networks.

T-Mobile shares have outperformed the broader wireless sector in recent years, although returns have been far from consistent over the past four years. The return for the shares was -14% in 2021, 21% in 2022 and 15% in 2023. The Trefis High Quality Portfolio, on the other hand, is less volatile, with a collection of 30 shares. And that is true outperformed the S&P 500 every year over the same period. Why is that? As a group, HQ Portfolio shares delivered better returns with less risk than the benchmark index; less of a rollercoaster ride, as evidenced by the HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment surrounding rate cuts and multiple wars, could TMUS face a similar situation to 2021 and 2023, and underperform the S&P in the next twelve months – or will it make a big jump?

Although T-Mobile has traditionally been known for its customer-friendly policies and competitive prices, with the use of 5G the company has also emerged as one of the best networks, given its wide and fast coverage. This should allow the company to grow faster compared to rivals AT&T and Verizon, with the potential for margin improvement via the closure of Sprint’s network. Additionally, free cash flows are expected to grow to between $16.6 billion and $17.0 billion. That said, T-Mobile’s valuation on a price-to-earnings basis appears rich relative to its peers. The stock trades at about 24x forward earnings, which is well above rivals AT&T and Verizon, both of which trade at high single-digit multiples. We value TMUS stock at $184 per share, about 10% below the current market price. See our analysis at T-Mobile rating: Expensive or cheap to learn more about what drives our price estimate for the company. Also view our analysis of T-Mobile revenues for more details on the company’s key business segments and how revenue is likely to develop.

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