What happened
Shares of T-Mobile (TMUS +1.41%) were up 0.9% after the market open on Monday. The move comes on another down day for the broader market, with the Nasdaq Composite Index down almost 1% earlier this morning. Shares of Verizon Communications and AT&T were also trading higher.
Top telecom stocks have outperformed the market year to date, with T-Mobile the only one of the leaders posting a gain, up 19%. Here are a few reasons why T-Mobile could hold up well going into 2023.
NASDAQ: TMUS
Key Data Points
So what
Last week, Morgan Stanley analyst Simon Flannery noted that telecom stocks should remain relatively immune from the macroeconomic headwinds. In the second quarter, T-Mobile delivered strong earnings and management raised guidance -- something that is quite rare in 2022.
Some stocks are more susceptible to the impact of rising interest rates and a strong U.S. dollar than others. T-Mobile is not one of those. The company effectively implements hedges to keep changes in currency and interest rates muted, so these factors had no impact on the company's cash flow through the first half of the year.
T-Mobile is not the cheapest stock on a price-to-earnings basis, but the market has rewarded the company for its superior record of profitable growth and shareholder returns compared to peers in the industry. The company recently announced a share repurchase authorization of $14 billion, representing 8% of the company's market cap.
Now what
T-Mobile is demonstrating solid business performance, and management is seeing strong adoption for the Magenta MAX 5G wireless plan. This plan was launched in early 2021 and is helping to grow postpaid average revenue per account, which increased 3% to $137.23 in the first half of 2022.
While T-Mobile maintains a lot of debt on its balance sheet, like other telecom leaders, the relative stability of its recurring revenue stream should allow investors to sleep well at night until the dust clears.
