T-Mobile CEO says Apple iPhone super cycle is here

(Yahoo Finance) – Hot off a much better than expected third quarter, T-Mobile CEO Mike Sievert thinks investors should buckle up for more upside because the Apple 5G iPhone “supercycle” is real.

“It’s already here,” Sievert told Yahoo Finance Live on if he is a believer in Wall Street’s “supercycle” thesis for the latest iPhone. Apple iPhone 12 pre-orders kick off on Friday, so it’s game-time for the carriers such as T-Mobile (TMUS), Verizon Communications (Yahoo Finance’s parent company), and AT&T to convince customers an upgrade to the tech giant’s first 5G handset is worthwhile.

Already, the deals for the iPhone 12 have been impressive (as in free, depending on one’s upgrade). That has led some analysts on Wall Street to voice concerns about an irrational promotional environment for the fourth quarter. And by extension, possible downside risk to profit margin forecasts for the telecom giants.

Sievert says he isn’t seeing any signs of irrational promotions for the iPhone — if anything they are somewhat consistent with last year’s model. Even still, T-Mobile did take a cautious stance with its fourth quarter guidance amid the competitive backdrop and the ongoing COVID-19 pandemic. Adjusted operating profits are seen being lower sequentially versus the third quarter.

That said, T-Mobile has more going for it than the new 5G iPhone. The company’s third quarter saw it add 2 million net customers and wring out greater than expected cost savings from its Sprint acquisition. T-Mobile said it crossed the 100 million customer mark for the first time.

Here’s how T-Mobile performed compared to Wall Street’s third quarter expectations.

Net Sales: $19.3 billion versus $18.34 billion estimate

Diluted EPS: $1.01 versus 51 cents a share estimate

T-Mobile shares rose nearly 7% in pre-market trading Friday off the results, pushing the stock’s year-to-date gain to about 56%. The upside move appears warranted for at least two reasons.

First, T-Mobile continues to deliver more cost savings from the Sprint deal than Wall Street has expected. It’s now on track for $1.2 billion in synergies this year, with plans to double that number in 2021. T-Mobile’s big earnings beats from the past two quarters suggest the Street continues to not model the newly combined companies correctly. That’s good for T-Mobile — it could keep on posting EPS upside and potentially supporting a higher stock price.

Sievert tells Yahoo Finance, T-Mobile may end up eclipsing its goal of $43 billion in Sprint synergies over time.

Secondarily, the iPhone 5G supercycle is likely to lift the financial fortunes of all the telecoms via higher monthly consumer data plans.

So yes, buckle up.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance.