Is T-Mobile Stock a Prize or Should Investors Just Hang Up?

NEW YORK (TheStreet) -- The market isn't buying T-Mobile (TMUS) as a potential takeover candidate anymore. Investors yawned last week when French telecom company Iliad (ILIAY)  said it may team up with partners to offer a better price for T-Mobile shares after its earlier offer was expected to be declined.

Ever since Sprint (S)  ended its quest to buy the fourth-largest mobile carrier last month and pushed TMUS shares down 18%, the company's stock has floundered. At close to $31, shares are down nearly 9% for the year to date. That may be on reason why T-Mobile has turned up the heat to beat its rivals in the business of attracting new customers.

Just Monday, T-Mobile said in a press release it "...vowed to beat the big carriers' best trade-in values on used devices." This comes at a time when major mobile device makers like Apple (AAPL) are about to announce a plethora of very desirable new devices. A T-Mobile representative was unable to comment on the company's plans at press time.

T-Mobile's plan to offer the most generous trade-in values for customers wanting to upgrade to the latest technologies may be what it takes to draw the attention of savvy investors. But maybe not.

Let's look at a year-to-date chart of its stock.

TMUS Chart
TMUS data by YCharts

Clearly, owning shares during 2014 has been a roller coaster. But here are two factors that I anticipate will move the shares of TMUS higher.

The first is the mounting evidence there are lots of predators that want to take control of all or part of T-Mobile. One of those predators may be DISH Network (DISH) . If this is the case it will boost the attractiveness of T-Mobile's shares.

Second is T-Mobile's determination to be a player in its industry. As its chief marketing officer Mike Sievert told the media, "When that new superphone's price is the same everywhere you go, the difference in your final cost comes down to the trade-in value of your old phone," so, "now when you're ready to upgrade -- it's a no-brainer where to find the best value -- the Un-carrier. Guaranteed."

That's why my 12-month price target for TMUS is $37, more than 20% higher than Monday's closing price. If a serious acquirer makes an offer for the company before the end of the year, that price target may be reached much faster.

At the time of publication, the author was long TMUS, S and AAPL although positions may change at any time.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


TheStreet Ratings team rates T-MOBILE US INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate T-MOBILE US INC (TMUS) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet." You can view the full analysis from the report here: TMUS Ratings Report

Marc Courtenay is a financial research analyst and the founder of Advanced Investor Technologies LLC as well as the publisher and editor of www.ChecktheMarkets.com.

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