T-Mobile US, Inc. (TMUS) carries CFRA's highest investment recommendation of 5- STARS, or Strong Buy, notes analyst Keith Snyder in CFRA Research's flagship newsletter The Outlook.

TMUS provides voice, messaging, and data services to 103.4 million postpaid, prepaid, and wholesale customers, making it the second largest wireless provider in the U.S. behind Verizon.

The company has been rapidly capturing market share for some time, with 25 consecutive quarters of industry leading net customer additions. The merger with Sprint, which closed in April of last year, accelerated its growth, while contributing a trove of extremely valuable mid-band spectrum licenses.

TMUS's leading spectrum position has enabled it to build the nation's best 5G network, according to independent data, while also reducing its need to spend on spectrum auctions.

We project 16.8% revenue growth in 2021, aided by contributions from the Sprint merger, followed by 2.0% growth in 2022. We expect growth to be supported by industry leading customer additions.

The current guidance calls for 4.4 million to 4.9 million postpaid customer net additions in 2021, which we see as conservative.

We also expect to see a recovery in equipment revenue, which experienced steep declines in 2020, as the Covid-19 outbreak resulted in store closures for a good part of the year and many customers held off on upgrades in the face of considerable economic uncertainty.

TMUS's focus on and investment in customer service has been instrumental in capturing market share from competitors. TMUS has been the leader in J.D. Power's customer care score for a number of years, which shows that its investment in call centers and human agents, rather than automated systems, is resonating well with customers.

Given the strength of TMUS's 5G network, we expect it will aggressively invest in expansion into adjacent markets. The most promising market, in our opinion, is wireless services for businesses, which is an incredibly lucrative market.

This market is currently dominated by AT&T (T) and Verizon (VZ), but we believe it is primed for the same disruption which has been so successful with consumers. Currently, TMUS has less than a 10% share of this market.

The company wants to expand to nearly 20% market share over the next five years. We think this goal is very achievable as TMUS has led in J.D. Power's business wireless satisfaction survey across all three business sizes for the past four years.

The second attractive area of expansion is the fixed wireless access market for both consumers and businesses. This would leverage TMUS's 5G network to provide broadband services to customers. The company estimates this industry generates $90 billion in annual revenues and its aim is to have 7 million to 9 million customers in five years.

Our 12-month target price of $160 applies an EV/EBITDA multiple of 11.2x to our 2021 estimate, a premium to peers, reflecting quarterly results that consistently beat both guidance and consensus estimates, ongoing market share gains, a strong, well rounded spectrum license portfolio, and numerous opportunities for expansion into additional markets.

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