Raymond James downgrades T-Mobile to outperform after strong stock rally By Investing.com

Investing.com — Analysts at Raymond James cut their rating on shares of T-Mobile from Strong Buy to Outperform, while raising their price target from $208 to $221.

While maintaining a positive outlook on the stock, the firm does not expect the same immediate share price growth as previously.

The revised outlook follows significant growth in T-Mobile’s share price and rapid expansion of free cash flow, which more than quadrupled between 2020 and 2023. The company’s stock has outperformed its peers, rising more than 75% since the end of the year 2021 compared to Verizon. (NYSE: NYSE: ) down about 13%, and AT&T (NYSE: NYSE: ) up 18% over the same period.

“With the full completion of the highly successful Sprint merger, T-Mobile remains the fastest-growing mature wireless industry and we believe it trades at a justifiable amount, but further multiple expansion is likely to be limited,” Raymond James analysts said in – an article. Wednesday’s note.

In terms of the company’s fiber strategy and capital allocation, analysts note uncertainty, particularly around the pending Lumos and Metronet deals, which are expected to close in mid-2025.

While T-Mobile anticipates internal rates of return in excess of 20% for its mixed fiber ventures, questions remain about the public market’s reception of these capex-based returns.

“We believe the company’s stance on remaining undercapitalized and off-balance sheet in its fiber investments is not as strong as it was a year ago as it sees its brand and distribution enabling higher penetration rates than its targets of ~35% most. overbuilder fiber companies are also looking at lower acquisition and operating costs,” the analysts continued.

“So there could be benefits to T-Mobile’s fiber strategy, but it makes a less ‘clean’ investment case.”

T-Mobile’s financial outlook at Capital Markets Day (CMD) excluded the impact of $10 billion in pending transactions, including those with Lumos, Metronet and UScellular.

As a result, Raymond James adjusted its 2024 to 2026 C-EBITDA estimates slightly downward, excluding these deals until further clarity is provided. The firm also expressed caution about potential regulatory challenges the UScellular deal may face.