We initiate on TMUS with a Hold rating and $245 PT. T-Mobile offers mobile communications and connectivity services in the United States, Puerto Rico, and the US Virgin Islands, serving over 108mn customers through both branded and wholesale channels.
Our thesis is based on a strong multi-year revenue outlook: We model T-Mobile generating $88.0bn in FY25E and $93.7bn in FY26E, running ahead of The street consensus on stronger-than-expected ARPA gains, the rapid T-Fiber ramp and incremental T-Satellite launch.
Here's the conundrum: while management's execution on premiumization and cross-selling fiber/satellite products adds 1-1.5% pts to ARPA and $1-1.5bn equipment upside that's largely ignored by The street, the market already ascribes this future growth at today's valuation.
We apply an EV/Sales multiple of 4.40x/4.15x on FY25E/26E - premia justified by underappreciated FCF leverage from higher-margin segments, but partially offset by our cautious step-down as growth rates normalize.
At our PT, we rate R/R as neutral, with capex intensity and tariff headwinds as risks to further multiple expansion.
Bottom line: TMUS is executing on all growth levers, but at $245/share, we see its superior outlook reflected in today's valuation.