Hook & thesis
T‑Mobile beat Q4 expectations and left the market with a simple story that still matters: subscriber momentum and industry-leading free cash flow. Management guided for $18.0-18.7 billion in adjusted free cash flow for 2026 and projected roughly 10% core adjusted EBITDA growth. Those are the ingredients for multiple support even if top-line growth normalizes.
The stock has retraced from its $276 52-week high to a $215 area after pain in January, but key technicals and fundamentals argue that now is a measured buying opportunity, not a capitulation. This is a trade to own while the company executes on FCF conversion and continues to add customers - with a clear stop in place if the macro or competitive environment deteriorates.
What the company does and why the market should care
T‑Mobile US, Inc. provides wireless voice, messaging and data services under the T‑Mobile and MetroPCS brands. The business is a blend of recurring subscription economics and heavy upfront network investment. For investors, the attraction is predictable cash flow from a large postpaid base and the optionality from continued network monetization and pricing flexibility.
Why care now: management is signaling very strong cash flow. The company guided $18.0-18.7 billion in adjusted free cash flow for 2026, and reported Q4 EPS of $2.14 on revenue of $24.33 billion. Those figures imply the business can fund operations and capital needs internally while returning capital to shareholders or reducing net leverage over time.
Where the numbers stand
| Metric | Value |
|---|---|
| Current price | $215.85 |
| Market cap | $237.9B |
| P/E | ~21.9x |
| EV / EBITDA | ~10.0x |
| Free cash flow (trailing) | $17.995B |
| 52-week range | $181.36 - $276.49 |
| Dividend yield | ~1.7% |
| Debt / Equity | 1.56 |
Put simply: the company is generating nearly $18 billion in free cash flow on an enterprise value of ~$321.5 billion. That puts price-to-free-cash-flow and EV metrics in a pragmatic range for a leader in wireless with accelerating cash conversion.
Technical backdrop - what the tape says
- The stock is trading above the short-term and medium-term moving averages: sma_10 = $208.87, sma_20 = $199.99, sma_50 = $198.07. That moving-average structure is constructive for a rebound thesis.
- Momentum indicators are positive: RSI around 65.6 and a bullish MACD histogram suggest upside tilt without being overheated.
- Short interest has been active but days-to-cover recently fell to ~1.85, lowering a persistent squeeze risk but keeping volatility possible on headline news.
Valuation framing
At a market cap near $238 billion and an EV of about $321.5 billion, T‑Mobile trades at ~10x EV/EBITDA and ~22x earnings. Those multiples are above traditional telecoms but below high-growth tech names. Given the company’s ~$18 billion in projected adjusted FCF for 2026, a market multiple in the low-teens on FCF would support a higher stock price; conversely, a reversion to telecom-like multiples would pressure the stock.
Historically, investors have paid a premium for T‑Mobile’s growth and scale. The current ratings reflect a market that still values steady subscriber additions and margin stability. With ROE around 18.6% and return on assets near 5.01%, the company exhibits a strong profitability profile for a capital-intensive industry.
Catalysts to drive the trade
- Execution on 2026 guidance: management expects $18.0-18.7 billion of adjusted FCF and ~10% core adjusted EBITDA growth - delivering that would validate the recovery thesis.
- Continued postpaid subscriber momentum and network quality commentary in quarterly releases or industry surveys.
- Sector re-rating led by competitor results - Verizon’s strong subscriber adds earlier this year show the market can reward wireless names when growth and FCF align.
- Dividend and capital-return cadence: ex-dividend date on 02/27/2026 and payable 03/12/2026 may stabilize flows for yield-sensitive investors near-term.
Trade plan (actionable)
Thesis: Buy shares now to capture a mid-term rebound as 2026 cash flow guidance and subscriber momentum get priced back into the stock.
Entry: Buy at $215.85.
Stop: $198.00. This sits just below the 50-day moving average (~$198.07) and protects against deeper technical breakdowns.
Target: $245.00.
Horizon: mid term (45 trading days) - expect the trade to play out over the next two months as results and guidance are validated and the market rerates cash flow. If catalysts accelerate (sustained subscriber beats or clear FCF upside), consider extending to a longer holding period.
Rationale: The stop limits downside to a break of the medium-term technical base; the target prices in a modest multiple expansion and continued FCF execution without assuming a full return to the $276 52-week high.
Position sizing & risk management
This is a medium-risk trade: the company has solid fundamentals but operates in a competitive market with leverage (debt/equity ~1.56). Limit position size so that a stop-triggered loss represents an acceptable percentage of portfolio risk. Re-evaluate after any earnings prints or major competitor announcements.
Counterargument
One could argue the stock is fairly priced for a company with high leverage and limited upside if subscriber growth slows. At ~22x earnings and ~10x EV/EBITDA, much of T‑Mobile’s value already factors in continued execution. If the macro or industry pricing dynamics deteriorate, multiples could compress and the stock could drift lower even without an earnings miss.
Risks (balanced list)
- Competition and pricing pressure - Verizon and AT&T can respond with aggressive promotions or pricing, compressing ARPU and margins.
- Capex shocks - higher-than-expected network investment (or a shift toward capex-heavy AI infrastructure) could reduce free cash flow and strain leverage metrics.
- Leverage profile - debt/equity around 1.56 means the company is exposed to rate and refinancing risk if cash flow weakens materially.
- Execution risk - misses on subscriber additions, churn trends or EBITDA conversion would undercut the valuation story and could push the stock below the stop.
- Regulatory or litigation surprises - wireless is subject to regulatory scrutiny and competitive legal actions (the dataset notes an ongoing legal backdrop in the industry).
What would change my mind
I would abandon the trade if T‑Mobile reports a material miss to its 2026 adjusted FCF guide, posts sustained subscriber losses, or if the debt profile deteriorates (e.g., signs of covenant stress or a need for large incremental financing). Conversely, sustained FCF upside, accelerating subscriber adds, or a clear announcement of significant buybacks would make me more bullish and could justify raising the target.
Conclusion
T‑Mobile is a cash-flow heavy, execution-driven story. The Q4 beat and $18.0-18.7 billion FCF guidance provide a solid, objective floor for the valuation. Technicals are constructive and short-interest dynamics reduce one class of volatility. For disciplined traders who respect the stop and size positions appropriately, buying at $215.85 with a $198 stop and a $245 target over a mid-term 45 trading-day horizon is a reasonable way to play a rebound in a market that still rewards reliable cash generation.
Trade summary: Buy $215.85, Stop $198.00, Target $245.00, mid term (45 trading days), risk: medium.