T-Mobile U.S. stock (NASDAQ: TMUS) saw a 9% increase in the last six months (126 trading days) and it now trades at $125 per share. This healthy rally was driven by expectations of faster growth in subscribers and revenue after the completion of the merger with Sprint Corporation. T-Mobile not only survived during the coronavirus pandemic, but it thrived. T-Mobile added 5.6 million postpaid customers in 2020, the most it has added in a single year, with total revenues having increased over 50% y-o-y. Also, its recent deal with Brookings Municipal Utilities (BMU) to acquire BMU’s Sprint-branded wireless assets will help TMUS widen its customer base. But will T-Mobile stock continue its upward trajectory over the coming months, or is a correction in the stock more likely? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for TMUS stock average close to 11% in the next six-month (126 trading days) period after experiencing a 9% rise over the previous six-month (126 trading days) period. Notably, though, the stock is likely to outperform the S&P500 over the six months, with an expected return which would be 4% more compared to the S&P500.
But how would these numbers change if you are interested in holding TMUS stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test TMUS stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
MACHINE LEARNING ENGINE – try it yourself:
IF TMUS stock moved by -5% over five trading days, THEN over the next 21 trading days, TMUS stock moves an average of 2.5 percent, which implies a return which is almost in line with that of the S&P500.
More importantly, there is 62% probability of a positive return over the next 21 trading days and 52% probability of a positive excess return after a -5% change over five trading days.
Some Fun Scenarios, FAQs & Making Sense of TMUS Stock Movements:
Question 1: Is the average return for T-Mobile US stock higher after a drop?
Consider two situations,
Case 1: T-Mobile US stock drops by -5% or more in a week
Case 2: T-Mobile US stock rises by 5% or more in a week
Is the average return for T-Mobile US stock higher over the subsequent month after Case 1 or Case 2?
TMUS stock fares better after Case 1, with an average return of 2.5% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 0.8% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how T-Mobile US stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold T-Mobile US stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For TMUS stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is generally lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
TMUS’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for T-Mobile US stock by changing the inputs in the charts above.
Despite short-term volatility, we believe that patient investors will benefit from holding TMUS stock which offers potential double-digit returns over the next six months. As per Trefis, T-Mobile valuation works out to $145 per share, reflecting more than 15% upside from its current level. The expected rise will be driven by a number of factors, but most importantly the company’s 5G expansion plans. The deal with Sprint is helping T-Mobile register healthy subscriber growth, while also providing the company access to Sprint’s key radio frequency assets which, when combined with T-Mobile’s, will give it industry-leading 5G technology. T-Mobile’s 5G network already covers 1.6 million square miles of the U.S., more than double its next closest competitor, AT&T. T-Mobile plans to extend that network to smaller markets and rural areas, thus aiming to raise that share close to 20% in the next five years, from its level of share which is in the low teens currently. A sharp rise in revenue over next few quarters is likely to offset the near-term drop in margins due to spending on 5G expansion, thus providing further upside to TMUS stock.
5G wireless technology is a hot trend. Which stocks should you pick? Check out our theme on 5G Stocks for details.