T-Mobile Stock Downgrade

Investing.com — Raymond James downgraded T-Mobile to Market Perform from Outperform on Friday, indicating that their thesis has already materialized.

>The firm noted, "We feel our thesis has played out and are not going to arbitrarily raise valuation multiples to justify a higher target vs. surging actual stock price."

Recently, Raymond James had lowered its rating from Strong Buy to Outperform, following a 13% rally in T-Mobile's stock.

With the stock now trading above their previous year-end 2025 price target of $221, analysts are moving "to the sidelines."

T-Mobile's performance post-Sprint merger has received wide acclaim. According to Raymond James, "TMUS has executed very well on what we believe may be the best merger ever in U.S. Telecom history, creating the strongest 5G spectrum and network position in the industry, driving ~$8B of annual synergies, all while remaining the value leader."

Since the end of 2021, T-Mobile's stock has surged 101%, outperforming peers Verizon (down 19%) and AT&T (up 19%).

However, analysts express caution regarding T-Mobile's current premium valuation. "TMUS now trades at 10.4x 2025 C-EBITDA, a 4.5x turn premium to AT&T/VZ trading at 5.9x (i.e., a 76% higher multiple)."

They point to slower buyback activities as an indicator of potential risks ahead. T-Mobile repurchased only $644M in shares last quarter, down from at least $2.2B per quarter since 3Q22.

The firm suggests that this could signal that the stock has become too expensive too quickly.

While T-Mobile's growth outlook remains solid, Raymond James notes it is decelerating compared to previous years. "While growth vs. peers remains robust at ~7% C-EBITDA CAGR in 2023-2027 guidance, this is slower than the 10.4% from 2021-2024."

Ultimately, despite strong execution, Raymond James sees limited upside, believing that the stock's premium valuation already reflects its growth.