T-Mobile US Inc (NYSE:TMUS) continues to show it can compete among giants like AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ). In fact, the company was able to post a profit in its latest quarter. And on the news, T-Mobile stock is up about 4%. But is there more room on the upside?
Well, let’s take a look at the quarter: Again, T-Mobile U.S. reported net income of $101 million, or 12 cents per share. The Street, on the other hand, was expecting a profit of 9 cents per share.
The top line for T-Mobile U.S. was also solid. In the fourth quarter, the company booked a 19.4% increase in revenues to $8.1 billion. This handily beat the analysts’ consensus of $7.9 billion.
For the most part, TMUS has been able to keep snagging customers. For the latest quarter, the company added 2.1 million customers, bringing the total to 55 million. During the past 12 months, the additions came to 8.3 million.
Actually, TMUS is closing in on Sprint Corp (NYSE:S), which has roughly 55.9 million customers.
Not long ago, TMUS was considered a has-been with little hope. But CEO John Legere has re-energized the company as well as the T-Mobile stock price. A key part has been the aggressive marketing and creative promotions. If anything, the TMUS brand has become cool, which is in stark contrast to the stodginess of Verizon, AT&T and Sprint.
The core message of TMUS is that it is the Uncarrier, which is more than about splashy commercials. For example, the company offers compelling contract-free Simple Choice plans, which are priced at attractive levels but still provide the kinds of services customers expect, such as international data, Wi-Fi calling and hefty amounts of data.
But somehow the company keeps coming up with interesting offerings. One of the latest is Stash, which allows customers to roll over their unused data. Oh, and TMUS has recently launched a new program to allow installment payments for new phones for customers with bad or even no credit. It’s dicey but mobile phones have become a must-have item and customers will probably find ways to get the money to pay their bills!
Such efforts are crucial since the U.S. market is mostly saturated. As a result, TMUS needs to find ways to pick away customers from Verizon and AT&T. And the strategy has been paying off in a big way. Consider that over the past two years, TMUS has added about 22 million customers.
All in all, the company is in a position to rack up more gains with its Uncarrier strategy but also generate nice profits. At the same time, the T-Mobile stock price is also reasonable, trading at 9X earnings before interest, taxes, depreciation, and amortization. This is only at a slight premium to the 8X multiples of AT&T and Veirzon.
But then again, TMUS is growing much faster and is creating a strong, differentiated brand, which should provide more lift for the stock in the upcoming quarters.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
