When selecting companies to trade, I'm a big believer in
having as many positive metrics in your favor as you can. Past
price performance certainly is one of the biggest drivers of a
stock, and that's something we can assess using charts and
technical analysis. There's also the fundamental side of the
#-ad_banner-#Yet, in certain circumstances, the biggest driver
of a stock is actually a personality, with people betting on the
prowess of a visionary CEO. Think Steve Jobs of
Elon Musk of Tesla Motors (Nasdaq:
Another personality-driven stock is wireless service provider
T-Mobile US (NYSE:
. CEO John Legere is known for his bold and colorful
presentations, in which he often aims his criticism directly at
the old guard in his industry. He also delivers services that
directly challenge them.
Case in point is T-Mobile's offer to pay the often substantial
early-termination fees of up to five family members when
customers make the switch from other carriers to his "no
contract" wireless service. While that proposal made a lot of
rival wireless service providers nervous, customers loved it.
The share price performance over the past year has been
impressive, with TMUS rising more than 75%.
Now the question is can TMUS keep building on those gains for
the next several months? I suspect they can.
First off, there's the company's latest earnings report, which
showed a huge gain in the number of wireless postpaid customers.
During the first quarter, T-Mobile added 1.3 million subscribers
to its rolls, a big number that clearly demonstrates the company
is executing on its plan to take the fight to its behemoth
To get those new customers, T-Mobile did have to spend some
money on marketing and those aforementioned early termination
fees. The result was a loss of $151 million in the first quarter,
down from a profit of $107 million in the same period last year.
Perhaps more importantly, revenue for the quarter was 47% higher
year over year at $6.9 billion, although part of that included
the merger with MetroPCS Communications.
Wall Street's reaction to the earnings announcement was
emphatically bullish, as shares surged 8% on May 1. That move was
in part due to the number of new subscribers garnered by
T-Mobile, but it also was due in large part to
an article on Bloomberg
that said rival
plans to push forward with a takeover bid for T-Mobile. The
article said Sprint met with six banks last month to make debt
arrangements to finance an offer.
The potential for a takeover by a big player like Sprint could
mean huge gains for TMUS shareholders, as Sprint would surely
have to pay a lot for the company that's hot on its trail and
poised to take over the #3 spot. I think that if Sprint does make
an offer, it would be at a price point substantially higher than
the current share price.
If that takeover deal doesn't materialize, then you can bet it
will be full throttle for T-Mobile in its efforts to continue
capturing more market share from Sprint and other competitors.
Either way, I think we are looking at another potential breakout
in TMUS that could send the stock 15% higher before the next
earnings report three months from now.
Action to Take -->
-- Buy TMUS at the market price
-- Set stop-loss 8% below entry price
-- Set initial price target at $35.75 for a potential 15% gain in
This article was originally published at
Wireless Takeover Target Poised for a
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