Goldman Sachs Upgrades T-Mobile, Adds To Conviction Buy List On Positive Outlook For 2015

Shares of T-Mobile US Inc (NYSE: TMUS) witnessed an upgrade from Goldman Sachs. The firm promoted the stock from Neutral to Buy (leaving it as its only Buy-rated wireless stock)and added it to its Conviction Buy list. The price target was also raised from $27 to $37, implying about a 27 percent potential upside.

In a report published Monday, Goldman Sachs analyst Brett Feldman listed several reasons for the upgrade, amongst which he highlighted "a view that TMUS will materially exceed 2015E consensus EBITDA of $7.1bn (GS est. $7.7bn) due to sustained sub growth, stabilizing ARPU, moderating opex headwinds and ramping MetroPCS merger synergies."

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In addition, the analysts project "an inflection to positive and rapidly growing FCF in 2015,” which is “a key operating milestone as ongoing FCF generation should provide TMUS with the financial flexibility (i.e., deleveraging) to sustain its investment in network capacity including potential future spectrum purchases."

Valuation is also attractive, the report stated. With its stock price above $29, T-Mobile trades at the low-end of its peer group, at 6.2x 2015E EBITDA, compared to 6.3x for AT&T, 6.9x for Verizon and 7.7x for Sprint Nextel.

Shares traded recently at $29.69, up 1.9 percent.