NEW YORK (TheStreet) -- Shares of T-Mobile US (TMUS) are slightly higher at $27.08 in pre-market trade after the Wall Street Journal's "Heard on the Street" column said the wireless carrier is positioned for a rebound after a difficult 2014.
"Despite adding millions of new customers while becoming more profitable--two of the primary metrics that have historically driven telecom stocks--the wireless carrier's shares have fallen 20% since the beginning of the year," the Journal said.
Further, the column added that "partly to blame is the dissolution due to regulatory risk of a well-publicized plan by Sprint (S) to make an offer for T-Mobile. But other forces, including general bearishness around a highly competitive U.S. wireless industry and skepticism over the sustainability of T-Mobile's business model, seem to be holding it back."
Exclusive Report: Jim Cramer's Best Stocks for 2015
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
The Journal pointed out that "T-Mobile trades at 5.9 times 2015 estimates for earnings before interest, taxes, depreciation and amortization versus 6.8 times for Sprint and 6.6 for Verizon (VZ) . Only AT&T (T) , whose Ebitda is expected to fall in 2014, trades at the same multiple as T-Mobile. Yet T-Mobile's Ebitda is expected to grow by about 3.5% this year and by 28% in 2015. AT&T's Ebitda is seen rising 2.7% in 2015. T-Mobile also added a net 3.6 million postpaid subscribers in the first nine months of 2014 compared with a net 2.4 million for AT&T."
In conclusion, the column noted that, "For weary T-Mobile shareholders, there may be a silver lining: The company's low multiple could make it more attractive to an acquirer such as DISH Network (DISH) . Dish Chairman Charlie Ergen is a notorious bargain hunter and should have a more valuable currency in his stock, which has run up thanks to the spectrum value implied by the government's auction for wireless airwaves."
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 revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth significantly trails the industry average of 58.0%. Since the same quarter one year prior, revenues slightly increased by 9.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $1,062.00 million or 28.57% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -14.78%.
- Compared to other companies in the Wireless Telecommunication Services industry and the overall market on the basis of return on equity, T-MOBILE US INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Wireless Telecommunication Services industry. The net income has significantly decreased by 161.1% when compared to the same quarter one year ago, falling from -$36.00 million to -$94.00 million.
- The share price of T-MOBILE US INC has not done very well: it is down 17.15% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: TMUS Ratings Report