Let’s call it what it is: a bear market. The US stock market has been on a slow and steady decline this year thanks to the economic crisis, finding fresh lows on a regular basis.
For example, one of the most important indices in the region, the Nasdaq Composite Index, has fallen by 28% over the last 12 months so far. But, one man’s trash is another’s treasure, and even in this declining market there are some stocks that managed to hit gold – and one of them is T-Mobile US. Let’s find out why a telecom provider has managed to stay ahead of the game in a world where nobody even likes talking on the phone.
Firstly, we’ll take a look at the Nasdaq Composite index in order to get an accurate comparison of T-Mobile’s numbers against the overall market.
The Nasdaq is a tech-heavy index and includes the stock of all companies listed on its namesake exchange. It’s been struggling through 2022 and it’s looking like the index could close the year with losses of over 28%, unless Santa brings a bull market with him this December.
The reason for this unhappy picture is a long-term crisis that started all the way back in mid-2019, when already multiple analysts were arguing that the American market was overpriced. Not long after, Covid-19 came along and made the global situation much worse, and as soon as that drama died down we were met with a large-scale military conflict and a severe energy crisis. What a time to be alive, eh?
The consequences of these events connect the financial markets across the world, and ultimately mean that almost everyone on the planet is now facing increasing inflation and rising consumer prices. So naturally, the central banks of the world stepped up to do what they do best: raise interest rates to temper inflation. The Fed is one of the most aggressive globally toward rate hikes, and each one sends a bearish shudder through the market.
While all this is going on though, T-Mobile US has seen its stock pop nearly 20% so far this year. We know, WTF?
Investors and analysts alike seem to have faith in this brand’s long-term growth potential and think there’s unlimited opportunities for consumer growth here. Contributing to that is the 5G network that T-Mobile is developing for itself – more and more US states focus on improving their connection networks, and T-Mobile has positioned itself at the forefront of this endeavor (along with a few competitors).
Another contributing factor is the $14bn buyback program the brand announced in September 2022, which saw the company – you can clearly see the stock react on the chart above. See that short raise on the chart above.
T-Mobile is not without pressure though, one of the key ones being inflation (though tbf that’s impacting literally everyone) which could bring down future earnings potential and continue to increase costs.
Nevertheless, most analysts have assigned T-Mobile as a ‘Strong Buy’ rating and think the stock is undervalued right now – you can see why when you look at the chart – with a high potential for future earnings growth. Music to investors’ ears, right?
An average estimation by experts is for an upside of +24% in the next 12 months, even though the US market overall faces bearish sentiment – in fact, the consensus is that the bear market has yet to even find a bottom. See, there’s always growth in adversity, if you look hard enough. However, before planting any seeds, make sure to always do your own research.