Many investors will wonder if T-Mobile (NASDAQ: TMUS) is making money because of its growth.
The number of T-Mobile US subscribers grew from 66.71 million in the first quarter of 2020 to 103.44 million in first quarter of 2021, Statista estimates. Thus, I calculate T-Mobile’s American subscriber base grew by 36.73 million customers in a year.
Conversely, T-Mobile’s US subscriber base fell from 86.05 million in fourth quarter of 2019 to 66.71 million in the first quarter of 2020. Statista attributes that fall to a change in T-Mobile’s subscriber policies. Notably, T-Mobile’s US subscriber base grew from 86.05 million in fourth quarter 2019 to 102.06 million in fourth quarter 2020.
Is T-Mobile a Tremendous Value Investment?
Thus, T-Mobile (TMUS) is capable of tremendous growth. Moreover, most of those subscribers pay T-Mobile $60 to $85 a month for their phones.
Since a phone is vital to life in modern America. Most of those people will pay that $60 to $85 even if they have to scrimp on the grocery bill or delay the rent.
Consequently, T-Mobile could be a tremendous value investment because it could generate enormous amounts of float. The float is a constant stream of subscription or premium revenue a company can tap for any purpose.
For example, T-Mobile can use the subscription float to expand its 5G network or pay of debt. In addition, T-Mobile can borrow against the float to pay for acquisitions.
How Much Cash Does T-Mobile Generate?
Fortunately, we can put this theory to the test by examining T-Mobile’s cash flow. I think T-Mobile’s cash flow numbers prove this theory.
For example, T-Mobile (NASDAQ: TMUS) reported a quarterly operating cash flow of $5.03 billion on 31 March 2021. The quarterly operating cash flow grew from $2.342 billion on 31 March 2020.
In addition, T-Mobile reported quarterly ending cash flow of $6.759 billion on 31 March 2021. The quarterly ending cash flow grew from $1.112 billion on 31 March 2020.
How Much Debt does T-Mobile Accumulate?
On the other hand, T-Mobile (TMUS) got a lot of that cash by borrowing. Notably T-Mobile reported quarterly financing cash flows of $2.505 billion on 31 March 2021 and $3.227 billion on 31 December 2020.
The quarterly financing cash flow fell from $14.551 billion on 31 June 2020. T-Mobile also pays off enormous amounts of debt. It reported a quarterly financing cash flow of -$7.289 billion on 30 September 2020.
Dramatically, T-Mobile’s Total Debt grew from $42.021 billion on 31 March 2021 to $110.942 billion on 31 March 2021. Thus, they built T-Mobile’s massive 5G network with debt.
How Much Money Does T-Mobile (TMUS) Make?
T-Mobile (TMUS) makes enormous amounts of money from that network. For instance, T-Mobile reported quarterly revenues of $19.759 billion on 31 March 2021. The quarterly revenues grew from $11.113 billion on 31 March 2020.
Similarly, T-Mobile reported a quarterly gross profit of $7.097 billion on 31 March 2021. The quarterly gross profit grew from $5.227 billion on $31 March 2020.
However, T-Mobile reported a quarterly operating income of just $2.139 billion on 31 March 2021. The quarterly operating income grew from $1.539 billion on 31 March 2020.
Consequently, T-Mobile had $6.677 billion in cash and short-term investments on 31 March 2021. The cash and short-term investments rose from $1.112 billion on 31 March 2020.
T-Mobile is Capable of Enormous Growth
T-Mobile (NASDAQ: TMUS) experienced enormous growth during the pandemic.
In particular, the Total Assets grew from $87.226 billion on 31 March 2020 to $203.332 billion on 31 March 2021. Thus, T-Mobile’s moneymaking capacity grew dramatically during the COVID-19 pandemic.
Notably, Stockrow estimates that T-Mobile’s revenues grew by 79.8% in the quarter ending on 31 March 2021. In contrast, T-Mobile’s revenue grew by 0.3% in the quarter that ended on 31 March 2020.
Mr. Market has noticed that growth. T-Mobile’s share price grew from $104.15 on 30 June 2020 to $144.88 on 31 June 2021. Plus, T-Mobile had a $180.6 billion Market Cap on 30 June 2021. Thus, I consider T-Mobile an attractive growth stock with a decent margin of safety.
What Value Does T-Mobile Have?
I think T-Mobile’s value comes from its massive subscriber base and its enormous coverage map.
The coverage map at T-Mobile’s website claims the company’s 4G and 5G network covers most of the mainland United States. For example, T-Mobile claims to cover all of North Dakota and Nebraska, almost all of Minnesota and Michigan, and most of my home state of Colorado.
However, the map shows there is no T-Mobile coverage in many mountainous areas including much of Idaho and Nevada. In addition, T-Mobile service is unavailable in large areas of California and Northern Mexico.
T-Mobile’s embrace of 5G is impressive
T-Mobile’s embrace of 5G is impressive. The company claims that all of its plans include 5G. To elaborate, 5G is fifth generation wireless network technology that can more data. T-Mobile claims 5-G is faster and more flexible than 4G LTE. Unfortunately, T-Mobile’s website does not say how much of North America its 5G Network covers.
I think the growth justifies the $146.29 Mr. Market paid for T-Mobile US (TMUS) on 2 July 2021. However, I cannot tell if the growth is sustainable.
If you are seeking a growth stock that could become a strong value investment, T-Mobile is worth a look.