T-Mobile US Inc (NASDAQ:TMUS, ETR:TM5) has been downgraded to a ‘Neutral’ rating by analysts at Citi who believe it is overvalued when compared to its competitors.
The analysts believe T-Mobile continues to generate favorable growth relative to the category and its competitors.
However, they see T-Mobile’s valuation as elevated above its competitors without any immediate accelerators to quickly reduce its premium.
“Over time, T-Mobile can still create some incremental value from possibly accelerating share gains in the market, leveraging its D2D Satellite option and pursuing acquisitions that can create synergies,” analysts wrote in a note to clients.
“An M&A possibility is a merger with a large Cable firm to accelerate T-Mobile’s positioning around convergence. However, such a deal could also significantly dilute top-line revenue growth, which could then be dilutive to its trading multiple.”
Citi wrote that it could revisit its thesis if T-Mobile shares pull back or if financial growth can accelerate meaningfully.
The analysts maintained their price target of $268 on T-Mobile.
Shares of the telco were down around 1.1% in morning trading Friday.