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MoffettNathanson analysts downgraded T-Mobile US Inc (NASDAQ:TMUS) to Market-Perform from Outperform with a $17 per share price target in a note Monday.
The analysts titled the note based on the Q4 2022 wireless industry as “the great deceleration.” MoffettNathanson has been historically bullish on T-Mobile shares, previously labeling it as “the best house on a bad block.”
“Our relatively bearish view of the wireless industry notwithstanding, we’ve always viewed T-Mobile’s combination of improving network, lowest prices, and modest valuation as too compelling to pass up. Until now,” explained the analysts.
“Here’s the problem: we see a growing mismatch between industry growth rates and company expectations, not just for T-Mobile, but for all of the Big Three. There is an emergent consensus that industry subscriber growth in Q4 was actually pretty good. After all, all of the Big Three reported relatively good subscriber growth metrics. Maybe competitive intensity isn’t so bad after all,” they added.
However, the firm said that subscriber growth is slowing and “quite significantly so.” The analysts added that market growth slowed by over two million subscribers in 2022.
“T-Mobile is still the best house on a bad block. We still love their cash return story. Despite dramatic outperformance in 2022, their valuation still isn’t particularly challenging,” the analysts added.
“But for the shares to outperform the market from here, we believe they will have to not just make, but beat and raise, their subscriber guidance. In a slower growth wireless industry, that will be a heavier lift. Cable’s accelerating share gains will make that even harder. So, yes, T-Mobile is still the best house on a bad block (by far). But it is a house that is now roughly fairly valued, in our view.”
