On Thursday, UBS reiterated its Buy rating on T-Mobile US (NASDAQ:TMUS) stock, with a steadfast price target of $210.00. The endorsement follows T-Mobile's optimistic Capital Markets Day where the company presented its financial outlook for 2027, which surpassed Wall Street's expectations, and outlined a robust capital allocation strategy.
T-Mobile anticipates achieving service revenue between $75 billion and $76 billion, EBITDA of $38 billion to $39 billion, and free cash flow (FCF) in the range of $18 billion to $19 billion by 2027.
These projections represent compound annual growth rates (CAGRs) of approximately 5%, 7%, and 8% respectively, excluding the impact of pending acquisitions of USM, Lumen, and Metronet. UBS believes these deals could potentially contribute an additional $1.5 billion to $2 billion in EBITDA for the year 2027.
The company also expects to maintain an annual capital expenditure (capex) of $9 billion to $10 billion, which aligns with previous estimates. With a leverage ratio of 2.5 times, T-Mobile plans to return $50 billion to shareholders, which is over 20% of its current market cap.
Additionally, the company anticipates having $20 billion available for other mergers and acquisitions, debt reduction, or further capital returns by 2027. This is a conservative estimate compared to UBS's earlier projection of over $60 billion in combined returns.
In line with its strategic growth initiatives, T-Mobile announced new partnerships with OpenAI and NVIDIA (NASDAQ:NVDA). These collaborations aim to drive innovation in radio access networks (RAN), enhance customer experiences, and unlock new business opportunities. These developments underscore the company's commitment to leveraging advanced technologies to maintain its competitive edge in the telecommunications industry.
In other recent news, T-Mobile has made significant announcements regarding its financial outlook and strategic partnerships. The telecom giant projects an adjusted free cash flow of $18-19 billion by 2027 and aims to acquire 12 million 5G broadband customers by 2028. The company has also announced an increase in its quarterly dividend to $0.88 per share, a 35% rise from the previous quarter, indicating a strong financial position.
T-Mobile plans to boost its EBITDA by $10 billion by 2027, as part of a comprehensive three-year growth strategy. The company is also leading the new AI-RAN Innovation Center in partnership with NVIDIA, Ericsson (BS:ERICAs), and Nokia (HE:NOKIA) to enhance 5G capabilities.
In a bid to improve customer service, T-Mobile has teamed up with OpenAI to develop an AI-based platform, IntentCX. These recent developments reflect T-Mobile's commitment to innovation, customer growth, and solid financial planning.
InvestingPro Insights
Recent data from InvestingPro underscores T-Mobile US's (NASDAQ:TMUS) financial health and market position. With a market capitalization of $229.24 billion, the company operates with a P/E ratio of 24.48, which adjusts to 22.31 on a last twelve months basis as of Q2 2024. This valuation reflects a PEG ratio of just 0.42, indicating potential undervaluation relative to its earnings growth. T-Mobile's revenue growth has been modest, with a 0.66% increase over the last twelve months leading up to Q2 2024, and a more robust quarterly growth rate of 3.0%.
InvestingPro Tips highlight that T-Mobile has a perfect Piotroski Score of 9, suggesting strong financial health, and is trading at a low P/E ratio relative to near-term earnings growth, which could appeal to value investors. The company's stock is known for low price volatility and is trading near its 52-week high, reflecting a price that is 95.33% of this peak. Moreover, T-Mobile is not only a prominent player in the Wireless Telecommunication Services industry, but analysts also predict it will be profitable this year, having been profitable over the last twelve months.
These insights, along with T-Mobile's strategic partnerships and ambitious financial projections, paint a picture of a company poised for continued success. For those interested in further analysis, there are additional InvestingPro Tips available, which can be accessed by visiting the InvestingPro platform.
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