Why T-Mobile US Stock Rose Just 10% in 2017

Markets Motley Fool

What happened

Continue Reading Below

Shares of T-Mobile US (NASDAQ: TMUS) gained 10.4% in 2017, according to data from S&P Global Market Intelligence. Investors in the third-largest wireless provider in North America fell short of larger gains in the stock market overall, as the S&P 500 returned 19.4% over the same period. A failed attempt to merge with fourth-place network Sprint (NYSE: S) was the core culprit behind this disappointing performance.

So what

In the first half of 2017, reports of a merger between Sprint and T-Mobile ran rampant. Going beyond mere rumors, management of both companies confirmed that they were having serious talks about a business combination. T-Mobile's stock rose on this wave; Sprint shares stayed as volatile and unpredictable as usual.

Then the merger idea fell apart. New reports said that Sprint was looking at better buyout offers from the cable industry. Regulatory approval of a T-Mobile-Sprint buyout started to sound like a coin flip. Above all else, clashing larger-than-life personalities on both sides made it impossible to structure a fair deal with a clear post-merger leadership team.

So the two went their separate ways. Both stocks plunged on the news that Sprint and T-Mobile would stay apart, though Sprint investors suffered a much harder hit, experiencing a 30% loss by the end of the year.

Continue Reading Below

Now what

Throughout all this drama, T-Mobile continued to steal mobile subscribers from its rivals and exceed Wall Street's earnings targets. The company would still prefer to team up with a spectrum-rich partner similar to Sprint in order to build economies of scale, and a merger like that would also help T-Mobile fill gaps in its wireless coverage maps. Moreover, the Un-carrier's consumer-friendly promotions and pricing policies are burning cash while attracting millions of new customers.

Still, the stock roared into 2017 and has now cooled down to a more reasonable valuation. T-Mobile looks like a sensible investment today, but not necessarily a screaming buy.

10 stocks we like better than Sprint
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Sprint wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 2, 2018

Anders Bylund owns one share of T-Mobile US. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.