With everything from once-high-flying software companies to behemoths such as Alphabet mired in losses this year, investors looking to make money in technology-related stocks have found a surprising winner — Bellevue-headquartered T-Mobile.
The mobile phone carrier has jumped 26% and is flirting with an all-time high. It’s the only tech, media or telecommunications stock among the Nasdaq 100 Index’s best performers, other than Activision Blizzard, the video game company that Microsoft is attempting to acquire.
Fast-growing tech companies with high valuations have been hit by higher interest rates, while a slowing economy has weighed on advertising-dependent internet businesses. But T-Mobile has been surpassing estimates for new subscribers this year, helped by its cut-rate mobile phone plans.
“As we saw during the pandemic, cellular connectivity is essential in modern society and is one of the last things to be cut by consumers,” said Keith Snyder, senior equity analyst at CFRA Research. “They may drop to lower-priced plans and hold off on purchasing new devices, but they won’t cancel service.”
T-Mobile has outperformed rivals AT&T and Verizon by aggressively pricing phone plans at lower rates, attracting customers whose wallets are being squeezed by rising inflation. AT&T fell 1.6% this year, while Verizon has slumped 13%.
It also made inroads into building out its 5G network since acquiring Sprint in 2020, at a time when its rivals were busy shedding their media ventures to turn their focus back to the telecom business.
T-Mobile is “benefiting from the Sprint merger, both on the revenue and cost side,” said Ric Prentiss, analyst at Raymond James. “T-Mobile has gained a 5G network advantage, and is no longer just a value leader but can compete and win on network quality as well.”
To be sure, the stock isn’t cheap. Trading at 30 times forward earnings, it dwarfs AT&T at 7.3 and Verizon at 8.6 times. The rivals also pay dividends, unlike T-Mobile. That has kept investors looking for a steady stream of dividends out of the fray.
Though T-Mobile has seen “great” business growth this year, it’s still “extremely expensive,” said David Bahnsen, chief investment officer at the Bahnsen Group, a wealth management firm with $3.7 billion in assets that owns a Verizon stake. Bahnsen said the stock is a “speculative play more than it’s a stable value play.”