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T-Mobile falls 6% on lagging phone subscriber growth; analysts acknowledge market strength but say TMUS is overvalued

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April 25, 2025
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T-Mobile falls 6% on lagging phone subscriber growth; analysts acknowledge market strength but say TMUS is overvalued
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T-Mobile US (NASDAQ: TMUS) reported better-than-expected first-quarter earnings on Thursday, but its slower-than-anticipated growth in core wireless phone subscribers weighed on investor sentiment, with shares tumbling 6.4% in premarket trading on Friday.

The company posted adjusted earnings of $2.58 per share on revenue of $20.9 billion, surpassing analyst expectations of $2.47 per share and $20.6 billion in revenue, according to FactSet.

A year earlier, the wireless giant had reported earnings of $2 a share on $19.6 billion in revenue.

High-speed internet gains offset phone subscriber shortfall

T-Mobile added a total of 1.34 million postpaid net customers during the quarter, above Wall Street’s forecast of 1.18 million.

Much of that growth was driven by gains in high-speed internet users.

However, the number of new postpaid phone customers, a closely watched metric, fell short.

The company reported 495,000 additions, below the 504,900 that analysts had estimated and down from 532,000 in the same quarter last year.

Despite the slowdown, T-Mobile reaffirmed its full-year guidance, saying it still expects total postpaid net customer additions in the range of 5.5 million to 6 million for 2025.

The company also confirmed that its upcoming satellite service would be priced at $10 per month, a move seen as a value addition in an increasingly competitive market.

Analysts see long-term strength but flag valuation risks

Brokerage opinion on T-Mobile remains largely optimistic, with 19 out of 30 firms maintaining a ‘buy’ or ‘strong buy’ rating, 10 having a ‘hold’ rating, and 1 ‘sell’.

The median price target stands at $275, according to data compiled by LSEG. However, some analysts have raised concerns about the stock’s valuation relative to its peers.

RBC Capital Markets, which maintains a “sector perform” rating with a $265 target, said T-Mobile’s growing presence in the business market should help meet subscriber targets despite macroeconomic headwinds.

But it noted the company’s enterprise value-to-earnings ratio for fiscal year 2026 stands at 11.09, well above the industry median of 6.56.

Moffett Nathanson, with a neutral rating and a $220 price target, said the stock appears insulated from ongoing trade tensions and tariffs but remains overvalued.

It also added that the churn in postpaid phone subscribers was an industry-wide trend.

Oppenheimer, which rates the stock “outperform” with a $300 target, said T-Mobile remains its top pick in the wireless telecom space.

“We believe the key to the stock’s performance is the company’s 5G network and now stock buybacks,” it said.

NewStreet Research, which rates the stock “buy’ with a target price of $308, said T-Mobile was “best positioned” in a market with rising competition given lower average revenue per unit (ARPU), higher capacity, and great momentum.

Economic uncertainty looms over telecom, but T-Mobile confident of growth

The results come after Verizon and AT&T released mixed earnings earlier this week.

Verizon beat profit estimates but reported a higher-than-expected loss in postpaid phone subscribers.

AT&T met expectations and posted a slight beat in new phone customers.

“In addition to having a strong runway for share gains driven by a capacity advantage, T-Mobile has more opportunity to drive EBITDA growth by matching AT&T and Verizon on price,” New Street Research analysts said

The broader telecom industry is bracing for possible fallout from the Trump administration’s tariffs on US trade partners.

While smartphones remain temporarily exempt, the prospect of levies later in the year has introduced additional uncertainty.

Analysts also caution that inflation and economic uncertainty could cause consumers to delay phone upgrades or opt for cheaper plans.

“Connectivity is just a core aspect of people’s lives,” T-Mobile CFO Peter Osvaldik told Barron’s. “This is an industry that not only weathered the pandemic but continued to grow,” he said.

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