NEW YORK (TheStreet) -- T-Mobile (TMUS) shares are down 0.78% to $38.25 in afternoon trading on Wednesday after the mobile carrier was downgraded today to "neutral" from "outperform" by analysts at Macquarie.
The downgraded outlook is in response to pessimism surrounding the company's possible acquisition by Dish Network (DISH).
"We are downgrading shares of our previous top carrier pick T-Mobile, as the shares have hit our $38 target price," analyst Kevin Smithen said.
"We feel the risk/reward is now fairly balanced, with a potential DISH bid at $41-$42 fully priced into the stock when adjusting for a lengthy regulatory approval process and potentially adverse reaction to Dish Networks' share price on a merger announcement," said Smithen.
Dish Network shares are up 0.63% to $69.50 in trading today.
TheStreet Ratings team rates T-MOBILE US INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate T-MOBILE US INC (TMUS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, expanding profit margins and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- T-MOBILE US INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, T-MOBILE US INC turned its bottom line around by earning $0.29 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus $0.29).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 58.3% when compared to the same quarter one year prior, rising from -$151.00 million to -$63.00 million.
- The revenue growth significantly trails the industry average of 56.1%. Since the same quarter one year prior, revenues rose by 13.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 47.62% is the gross profit margin for T-MOBILE US INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.80% is in-line with the industry average.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: TMUS Ratings Report