Wolfe Downgrades T-Mobile Stock and Raises Multiple Concerns

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By Senad Karaahmetovic

T-Mobile shares are experiencing a decline in pre-market trading on Tuesday following a downgrade from Wolfe Research analysts, who revised their rating to Peer Perform from the previous Outperform.

While the analysts acknowledged that T-Mobile continues to be a compelling story, they voiced several concerns that could lead to underwhelming performance for the company’s shares. These concerns include slowing subscriber growth within the industry, diminishing benefits from Sprint’s customer churn, substantial long-term capital requirements for home Internet services, a consensus that is considered "fair but full," and potential downside risks in valuation multiples.

The analysts noted, "Telecom businesses are fundamentally stable, owing to the provision of essential services to a vast customer base using extensive physical assets. Nevertheless, despite the generally low volatility of telecom stocks, changes in competition and forward-looking valuation can create cycles of both growth and decline."

They further stated, "The adjustment in forecast can unexpectedly influence relative performance, which is the reason for our downgrade of T-Mobile."

Additionally, the analysts have lowered their forecasts for subscriber growth and EBITDA for 2023 and the longer term, now positioning them below or in line with market consensus.

In 2022, T-Mobile’s stock had a strong performance, closing over 20% higher for the year.