We have noted T-Mobile US's positive performance during today's morning trading session, during which it logged a 2.0% outperformance of the S&P 500. At its current price of $232.84, the company is now trading in range of its average target price of $243.18, which calls into question its ability to keep moving higher. Analysts have given the Communication Equipment stock target prices ranging from $184.95 to $280.0 dollars per share, with an average rating of buy.
The market seems to share this rosy outlook, since T-Mobile US has a short interest of only 2.8%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 39.2% of T-Mobile US's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
Overall, there is positive market sentiment on T-Mobile US because its an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and only a small number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are TMUS's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 18,559,000 | 9,801,000 | 8,758,000 | 211.56 |
| 2022 | 16,781,000 | 13,970,000 | 2,811,000 | 76.68 |
| 2021 | 13,917,000 | 12,326,000 | 1,591,000 | 166.46 |
| 2020 | 8,640,000 | 11,034,000 | -2,394,000 | -652.89 |
| 2019 | 6,824,000 | 6,391,000 | 433,000 | 126.37 |
| 2018 | 3,899,000 | 5,541,000 | -1,642,000 |
