T-Mobile’s stock has recently faced a notable decline, dropping over $20 since reaching a 52-week high of $276.49 last month. By the end of the week, the shares closed at $255.98, with an additional decline of $1.97 after hours, bringing the total to $254.01. The downward trend was triggered by a downgrade from Citi analyst Michael Rollins, who suggested that T-Mobile’s competitive edge might be waning.
He adjusted the stock rating from Buy to Hold, while maintaining a price target of $268, indicating a potential 3% increase from current levels. Rollins pointed out that T-Mobile’s shares are currently trading at a significant premium compared to its competitors. Specifically, T-Mobile’s price-earnings ratio stands at 23, a staggering 70% higher than that of both AT&T and Verizon.
The analyst expressed concern over the absence of near-term growth drivers that could help justify this premium valuation. To mitigate this premium without causing a drop in stock price, T-Mobile might need to enhance its market share or consider acquiring a major cable company. However, Rollins cautions that such an acquisition could halt T-Mobile’s growth trajectory and potentially dilute its revenue growth.
Despite the recent challenges, T-Mobile’s stock has appreciated 58.2% over the past year, outperforming AT&T’s 55.9% and Verizon’s 10.33% increases, while the S&P 500 rose by 7.2% in the same timeframe. Currently, T-Mobile boasts a market capitalization of $293 billion, making it the most valuable among the three major wireless firms. In contrast, AT&T and Verizon are valued at $190.7 billion and $183.4 billion, respectively.Interestingly, AT&T received a boost with an upgrade from Raymond James analyst Frank Louthan, who raised the stock’s target price while maintaining a strong buy rating, adding to the bearish sentiments surrounding T-Mobile’s recent downgrade.