T Mobile US (TMUS – Research Report), the Communication Services sector company, was revisited by a Wall Street analyst yesterday. Analyst Michael Rollins from Citi downgraded the rating on the stock to a Hold and gave it a $268.00 price target.
Michael Rollins has given his Hold rating due to a combination of factors related to T-Mobile US’s current market position and valuation. While T-Mobile continues to show strong growth compared to its peers, its valuation remains high with a forward-looking FV/EBITDA multiple of approximately 11x, significantly above the industry average of around 6x. This premium valuation is largely attributed to T-Mobile’s faster projected service revenue growth, but there are no immediate catalysts expected to reduce this premium.
Additionally, T-Mobile’s potential for future value creation through market share gains, strategic acquisitions, and innovations in ad tech and AI are acknowledged. However, the risk of increased competition and associated costs in the wireless sector could impact its trading multiples. The possibility of a merger with a large cable firm could also dilute revenue growth, affecting its valuation further. Thus, the Hold rating reflects the current limitations on upside potential unless there is a significant pullback in share price or accelerated financial growth.
Rollins covers the Communication Services sector, focusing on stocks such as AT&T, Lumen Technologies, and Verizon. According to TipRanks, Rollins has an average return of 12.2% and a 65.38% success rate on recommended stocks.
In another report released on March 12, Bernstein also maintained a Hold rating on the stock with a $265.00 price target.
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