Raymond James upgraded T-Mobile to Outperform on Monday, arguing that fears of SpaceX competition are overblown. The call follows a Friday selloff in US telecom stocks after SpaceX announced a spectrum acquisition.
Raymond James raised T-Mobile to Outperform from Market Perform on Monday ahead of third-quarter results, saying concerns about competition from SpaceX have been overdone. Analyst Frank Louthan set a $170 price target.
Why telecom stocks fell on Friday
SpaceX agreed to acquire Grain Management's nationwide 800 MHz spectrum portfolio, subject to Federal Communications Commission approval and other closing conditions. The company announced the deal on October 8, and investinglive describes it as an important development for SpaceX's Starlink Mobile ambitions.
Investors responded on Friday, October 9. T-Mobile closed down 13.27%, AT&T fell 10.82% and Verizon dropped 10.14%. Tower operators moved the other way, as investors anticipated that SpaceX might need their infrastructure to build out a terrestrial network.
Raymond James sees a buying opportunity
Louthan called the recent pullback a buying opportunity. According to the analyst: "they are 3+ years away from becoming reality", referring to the SpaceX threat.
He also argued that owning spectrum and building a reliable mobile network are two different things. In his view, established carriers hold significant advantages in spectrum and terrestrial network capability, and a 5-megahertz channel in each direction of low-band spectrum remains limited next to incumbent holdings.
His target rests on about nine times his 2027 price to free cash flow estimate and seven times enterprise value to EBITDA, compared with roughly seven and six times for the large-cap telecom group.
The caveats
Louthan said T-Mobile still trades more expensively than peers and that its converged strategy has limits, given its reliance on fixed wireless and a smaller fiber footprint. However, he said stronger subscriber growth and depressed sector multiples offset that.
Investinglive notes that SpaceX has announced a spectrum acquisition, not the immediate displacement of established mobile carriers, and that both outcomes for carriers and tower operators remain uncertain.
Sources: Investing.com, Investinglive
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