With the COVID-19 pandemic front and center in everyone's minds, it's hard to look to the future, even a year out.
But ignoring T-Mobile (TMUS 1.98%) would be a disservice to your portfolio.
COVID-19 is rapidly spreading across the U.S. and Europe, placing the global markets in a tailspin. Stocks have been whipsawing between steep losses and gains. But T-Mobile has been able to weather the malaise unscathed. Year-to-date shares are up amid a massive sell-off in stocks.
There are good reasons the stock has stood up during the coronavirus-induced malaise. Sure, T-Mobile has storefronts that had to be shuttered and customers who can't pay their bills, but it's less impacted by the pandemic than travel or hospitality companies.
With millions of people ordered to shelter in place and companies across the world transitioning to remote workforces, network usage has been surging. So much so that the Federal Communications Commission last month granted T-Mobile additional airwaves to meet the increase in network traffic. While it may not benefit T-Mobile now, given that customers are struggling, once the virus is contained T-Mobile could end up with new customers and more usage.
T-Mobile, Sprint combined will be a 5G powerhouse
Then there's the merger with Sprint (S), which closed earlier this week. The combined company is forecast to be in a much better 5G position than if the two pieces remained alone. The new T-Mobile will also be in a better position to take on its rivals in 5G, given its stronger spectrum portfolio that spans all relevant spectrum bands. That means T-Mobile won't be limited to one 5G technology. When announcing the closing of its merger with Sprint, T-Mobile said customers will have access to 5G speeds that are as much as eight times faster than current LTE in a few years and 15 times faster over the next six years.
T-Mobile is also going after the rural markets in the U.S. with its 5G network. It's aiming to deliver super-fast wireless internet to about 90% of homes in the U.S. by 2024 and vows to offer customers better service at lower prices. By 2024 the wireless carrier aims to have in-home broadband service in more than half of the households in the U.S.
Bulls expect the combined company to have a real 5G advantage over rivals Verizon (VZ 0.83%) and AT&T (T 1.27%) That should help T-Mobile capture more customers on the retail side of things. Even more important, with T-Mobile offering speedy internet, it will be able to compete on the corporate side in a bigger way.
The stock is set to surge
T-Mobile's prospects on the 5G front are prompting some on Wall Street to raise their price targets on the stock, even amid COVID-19. MoffettNathanson recently set a $125 price target on the stock, saying the new T-Mobile will be a "winner" and calling it the most "compelling" stock in its telecom/cable/satellite coverage. The investment firm said while it's hard to look beyond the pandemic, once the dust settles, even if it's six months from now, T-Mobile will thrive.
"Like all telecoms, it will be far less directly impacted by coronavirus than will the rest of the economy, so over the near term, it should be relatively defensive," analyst Craig Moffett wrote. "But longer-term, the T-Mobile story is about much more than playing defense. T-Mobile is poised to grow."
At $125 a share, MoffettNathanson thinks shares of T-Mobile could appreciate 50%. MoffettNathanson isn't alone. The median price target for T-Mobile stands at $102, implying 23% upside.
Uncertainty abounds as the pandemic rapidly spreads across the U.S., but the 5G buildout will continue, and with T-Mobile poised to offer super speeds even in rural America, the wireless carrier should be in a stronger position even a mere year from now.