T-Mobile Sales Soar 74% On Record Subscriber Growth; Shares Gain 5.4%

Shares of T-Mobile rose 5.4% on Friday after its 3Q revenues soared 74% year-over-year to $19.3 billion and beat the Street estimates of $18.34 billion, thanks to higher subscriber base and benefits from its Sprint merger. 3Q earnings of $1 per share compared with analysts’ expectations of $0.46 per share, but remained flat on a year-over-year basis.

T-Mobile US (TMUS) added “record-high” 2.04 million subscribers in 3Q, more than double the net additions of 1 million projected by analysts. The company’s postpaid net additions of 1,979,000 in 3Q were driven by “best in industry” postpaid phone net additions of 689,000, the company said.

T-Mobile’s CEO Mike Sievert said “Customers are choosing T-Mobile in record numbers because we are the only ones that can deliver this combination of value and experience with a true 5G network that is available to customers in every single state.”

The company also remains confident “to deliver $43 billion of synergies and achieve the $6 billion of annualized savings from the Sprint merger from a combination of cost avoidance and expense reductions.” T-Mobile is “targeting more than $1.2 billion of synergies in 2020,” from the merger.

As for the second half of 2020, the company expects postpaid phone net customer additions of 1.3 million to 1.4 million, which includes 600,000 to 700,000 subscriber additions in 4Q. T-Mobile raised its adjusted EBITDA guidance to a range of $13.6 billion to $13.7 billion, up from previous range of $12.4 billion to $12.7 billion. (See TMUS stock analysis on TipRanks)

On Nov. 5, Oppenheimer analyst Timothy Horan said “Management is executing well through COVID and making good progress on the merger integration with Sprint.” Horan added that “revenue growth is accelerating, and TMUS is very confident on delivering $6B in annualized cost savings.” The analyst maintained a Hold rating on the stock, saying “We’ve yet to see bumps in the road on integration or a major competitive response from peers.”

Unlike Horan, the rests of the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 13 Buys vs. Oppenheimer’s Hold. The average price target of $143.50 implies upside potential of about 16.1% to current levels. Shares have gained by about 57.6% year-to-date.