Is T-Mobile the Next Hot Mobile Stock?

With shares of T-Mobile (NYSE:TMUS) trading around $24, is TMUS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

T-Mobile offers mobile communications services under the T-Mobile brands in the United States, Puerto Rico, and the U.S. Virgin Islands. Its service offerings include postpaid and prepaid wireless voice, messaging and data services, mobile broadband, and wholesale wireless services. Dish Network (NASDAQ:DISH) has recently dropped a bid for Clearwire (NASDAQ:CLWR) so it is rumored that T-Mobile may be its next target. The company has been increasing its user base at great rates, and a recent takeover rumor may be the fuel it needs for the stock to soar higher.

T = Technicals on the Stock Chart are Strong

T-Mobile stock has seen a consistent uptrend since its initial public offering just this year. The stock is now near all-time highs and is not seeing any significant signs of slowing just yet. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, T-Mobile is trading above its rising key average which signals neutral to bullish price action in the near-term.

TMUS

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of T-Mobile options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

T-Mobile Options

46.15%

53%

50%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on T-Mobile’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for T-Mobile look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

-16.67%

-65.50%

173.70%

78.26%

Revenue Growth (Y-O-Y)

0.82%

3.73%

4.46%

5.93%

Earnings Reaction

N/A

N/A

N/A

N/A

T-Mobile has seen mixed earnings and rising revenue figures over the last four quarters.

P = Excellent Relative Performance Versus Peers and Sector

How has T-Mobile stock done relative to its peers, Verizon (NYSE:VZ), AT&T (NYSE:T), Sprint Nextel (NYSE:S), and sector?

T-Mobile

Verizon

AT&T

Sprint Nextel

Sector

Year-to-Date Return

21.48%

18.35%

5.93%

23.02%

15.22%

T-Mobile has been a relative performance leader, year-to-date.

Conclusion

T-Mobile provides valuable communications products to consumers and companies who are eager to connect with people and companies around the world. The stock has been on a bullish run since its initial public offering and is not yet displaying any signs of slowing. A rumored acquisition of the company could also fuel a move higher for the company. Over the last four quarters, earnings have been mixed while revenue figures have been on the rise. Relative to its peers and sector, T-Mobile has been a year-to-date performance leader. Look for T-Mobile to OUTPERFORM.

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