T-Mobile US, Inc. (TMUS) reports fourth quarter 2020 earnings after Thursday's closing bell, with analysts looking for a profit of $0.54 per share on $19.87 billion in revenue. If met, earnings per share (EPS) will mark a 38% profit decline compared to the same quarter last year. The stock took off in a strong advance after the company beat third quarter top- and bottom-line estimates in October, posting an all-time high at $135.45 in early January.
- T-Mobile reports fourth quarter earnings on Thursday, Feb. 4.
- The stock has been range bound since early December.
- Wall Street analysts are more bullish than current price action.
- It could take a blowout quarter to generate new highs.
T-Mobile is the undisputed telecom market leader, outperforming rivals AT&T Inc. (T) and Verizon Communications Inc. (VZ) by wide margins. It hasn't been close, with T-Mobile stock more than doubling in price in the past three years while ATT&T posted a negative return and Verizon gained less than 2%. Last year's Sprint acquisition has solidified T-Mobile's already commanding market position, underpinned by high customer service rankings.
T-Mobile provided an upbeat fourth quarter assessment in January, reporting 5.5 million postpaid net additions in 2020. Postpaid churn, or turnover, hit 1.03% in the quarter, compared to 0.90% in the full year. The company added a record 5.6 million customers during the year and 1.7 million in the fourth quarter. Total customer count now stands at 102.1 million, lower than both rivals, with market share gains coming mostly at Verizon's expense.
Wall Street consensus on T-Mobile is highly bullish, with a "Buy" rating based upon 23 "Buy," 3 "Overweight," 2 "Hold," 1 "Underweight," and no "Sell" recommendations. Price targets currently range from a low of $120 to a Street-high $215, while the stock opened Wednesday's session more than $20 below the median $151 target. A strong quarterly report has the power to generate a rally to new highs, given this humble placement.
The churn rate, also known as the rate of attrition or customer churn, is the rate at which customers stop doing business with an entity. It is most commonly expressed as the percentage of service subscribers who discontinue their subscriptions within a given time period. It is also the rate at which employees leave their jobs within a certain period. For a company to expand its clientele, its growth rate (measured by the number of new customers) must exceed its churn rate.
T-Mobile Weekly Chart (2013 – 2021)
A multi-year uptrend reached resistance at the 2007 high above $40 in 2015, yielding narrow range-bound action ahead of a 2016 breakout that generated impressive returns into the second quarter of 2017, when buying pressure fizzled out in the upper $60s. That price level marked resistance into a strong 2019 buying impulse that reversed at $101.35 in February 2020, giving way to a 28-point slide into March.
A V-shaped recovery wave completed a 100% retracement into the first quarter peak in May, yielding a June breakout that stair-stepped higher into early December, when the stock topped out in the mid-$130s. Two breakout attempts have failed since that time, generating several downdrafts through 50-day exponential moving average (EMA) support. A jagged consolidation pattern into February matches mixed technicals, but overall selling pressure has been limited.
Relative strength indicators have been giving off mixed messages since the start of 2021, with a monthly buy cycle undermined by a weekly sell cycle. This conflict highlights easily observed confusion in current price action, in which neither bulls nor bears are displaying a strong edge. It could take fourth quarter numbers well above expectations to overcome this inertia and lift the stock into a new trend advance.
A V-shaped recovery is a type of economic recession and recovery that resembles a "V" shape in charting. Specifically, a V-shaped recovery represents the shape of a chart of economic measures economists create when examining recessions and recoveries. A V-shaped recovery involves a sharp rise back to a previous peak after a sharp decline in these metrics.
The Bottom Line
T-Mobile reports fourth quarter earnings this week after posting an all-time high in January. Neither side has a major advantage heading into the report, indicating that numbers will likely need to fall outside expectations to move the ticker tape.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.