(Bloomberg) – With everything from once-high-flying software companies to giants such as Alphabet Inc. mired in losses this year, investors looking to make money in tech-related stocks have found a winner. surprising – T-Mobile US Inc. .
The mobile phone operator jumped 26% and is flirting with a historic record. It’s the only top-performing technology, media or telecommunications stock on the Nasdaq 100 index, except for Activision Blizzard Inc., the video game company being acquired.
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 exceeded new subscriber estimates this year, helped by its discounted cellphone plans.
“As we’ve seen 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, principal equity analyst at CFRA Research. “They can upgrade to cheaper plans and delay buying new devices, but they won’t cancel service.” It has a strong buy rating on the stock.
T-Mobile has outperformed rivals AT&T Inc. and Verizon Communications Inc. by aggressively pricing phone plans at lower rates, attracting customers whose wallets are squeezed by rising inflation. AT&T has fallen 1.6% this year, while Verizon has fallen 13%.
It has also made inroads in building out its 5G network since acquiring Sprint Corp. in 2020, at a time when its rivals were busy shedding their media businesses to once again focus on the telecommunications sector.
T-Mobile “benefits from the Sprint merger, both on the revenue and cost side,” said Raymond James analyst Ric Prentiss, who has a strong buy recommendation on the stock. “T-Mobile has gained an edge on the 5G network and is no longer just a value leader, but can compete and win on network quality as well.”
Admittedly, the stock is not cheap. Trading at 30 times forward earnings, it eclipses AT&T at 7.3 and Verizon at 8.6 times. The rivals also pay dividends, unlike T-Mobile. This kept investors looking for a steady stream of dividends out of the fray.
While T-Mobile has seen “great” business growth this year, it’s still “extremely expensive,” said David Bahnsen, chief investment officer of Bahnsen Group, a $3.7 billion wealth management firm. assets that owns a stake in Verizon. Bahnsen said the stock is a “speculative game more than a stable value game.”
Technical table of the day
The Nasdaq 100 posted its fourth straight week of gains, its longest streak since November last year. The tech-heavy index has added about $3 trillion in market value since its June low. Tech stocks have rebounded in recent weeks after a string of resilient end-of-quarter reports. They were further boosted by weaker than expected inflation data last week. The index was trading lightly on Monday.
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(Updates with stock movement in last paragraph.)
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