Where Will T-Mobile Go Next?

With shares of T-Mobile (NASDAQ:TMUS) trading around $26, is TMUS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

T-Mobile offers mobile communications services under the T-Mobile brands in the United States, Puerto Rico, and the U.S. Virgin Islands. Its service offerings include postpaid and prepaid wireless voice, messaging and data services, mobile broadband, and wholesale wireless services.

T-Mobile is planning a stock offering of close to $2 billion as the fourth largest wireless carrier in the U.S. looks to raise money to expand its 4G network. T-Mobile, which advertises itself as the “un-carrier,” has been making aggressive pushes to better compete against AT&T Inc. (NYSE:T) and Verizon Communications (NYSE:VZ), which dominate the American wireless market. T-Mobile added more subscribers than expected last quarter but is still losing money, posting a net loss of $36 million.

T = Technicals on the Stock Chart Are Strong

T-Mobile stock has been surging higher since its initial public offering. The stock is currently trading near all time highs and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, T-Mobile is trading between its rising key averages, which signal neutral price action in the near-term.

TMUS

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of T-Mobile options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

T-Mobile Options

30.17%

6%

4%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

December Options

Average

Average

January Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on T-Mobile’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for T-Mobile look like and more importantly, how did the markets like these numbers?

2013 Q3

2013 Q2

2012 Q1

2012 Q4

Earnings Growth (Y-O-Y)

N/A

N/A

-16.67%

-65.50%

Revenue Growth (Y-O-Y)

N/A

27.54%

0.82%

3.73%

Earnings Reaction

-0.77%

4.12%

-0.78%

N/A%

T-Mobile has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about  T-Mobile’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has T-Mobile stock done relative to its peers, Verizon (NYSE:VZ), AT&T (NYSE:T), Sprint (NYSE:S), and sector?

T-Mobile

Verizon

AT&T

Sprint

Sector

Year-to-Date Return

48.75%

-3.63%

-5.24%

24.95%

17.20%

T-Mobile has been a relative performance leader, year-to-date.

Conclusion

T-Mobile is attempting to revolutionize the communications industry by providing less restricted products and services to consumers and companies. The company is planning a stock offering of close to $2 billion as the fourth-largest wireless carrier in the U.S. looks to raise money to expand its 4G network. The stock has been surging higher since its IPO and is currently trading near all time highs. Over the last four quarters, earnings have been mixed while revenues have been rising, which has produced conflicting feelings among investors in the company. Relative to its peers and sector, T-Mobile has been a year-to-date performance leader. Look for T-Mobile to OUTPERFORM.

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