T-Mobile shares crash following comments made by CEO Mike Sievert
T-Mobile's CEO, Mike Sievert, appeared on Monday at the UBS Global Media and Communications Conference where he engaged in a fireside chat with the investment bank's Telecom and Cable analyst John Hodulik. Sievert was optimistic about the carrier meeting its full-year guidance which includes a strong fourth quarter. For the full year, Sievert expects T-Mobile to meet its previous forecast which called for postpaid phone net additions to reach 3 million with Average Revenue Per Account (ARPA) rising 3% year-over-year.
Sievert also reiterated some other expectations for T-Mobile's 2024 numbers. As usual, the company expects to announce industry-leading customer growth. It also forecasts industry-leading service revenue with a compounded annual growth rate of about 5% through 2027. Adjusted Earnings Before Interest, Taxes, and Amortizations (EBITDA) will produce a compounded annual growth rate of approximately 7% through 2027.
Sievert shook up Wall Street at the start of the conference when a comment he made about the current quarter was apparently misinterpreted as a warning by one media outlet. The CEO had said, "So while I'm here to tell you, it's going great, we're confident in our guidance, investors should be cautious because there's a lot of risk in the back half [of the fourth quarter]." Thanks to that comment, T-Mobile investors told their brokers to sell the stock which has tripled over the last five years.
On Monday, sellers took over and T-Mobile's shares dropped a Christopher Columbus-like $14.92 or 6.12% to close at $228.86. The stock recently set a new all-time high of $248.16. The sharp sell-off in the stock started once Sievert said that the extremely strong third quarter results reported by the company in October could be hard to top during the fourth quarter. As a result, some investors might perceive the fourth quarter results to be the start of a slowdown.
During the third quarter, T-Mobile generated 865,000 postpaid phone net customer additions which was the highest number reported for a third quarter in more than a decade. This record will be hard to top during the fourth quarter and the CEO said this could lead some people to worry about a slowdown during the final quarter of the year.
"It was great to be back at UBS sharing my continued optimism around T-Mobile’s growth plans and that our Q4 and year are very much on track. My comments explaining normal seasonal trends in Q4 were misinterpreted by one media outlet as a warning, so I want to make sure there is no investor confusion. To be clear, our Q4 is trending at least in line with prior expectations, maybe better. We continue to expect to deliver about 3 million postpaid phone net additions for the year, or more. Q3 was a fantastic growth quarter for T-Mobile and our growth momentum continues in Q4."-Mike Sievert, CEO, T-Mobile
T-Mobile also expects to report a compounded annual growth rate of approximately 25% through 2027 in Adjusted Free Cash Flow conversion. The carrier's business plan calls for approximately $80 billion in capacity for investments and shareholder returns through 2027.
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