Are USM, TDS Trump Trades Now? Raymond James Upgrades Mid-Cap Telecom Stocks On Reduced Regulatory Risk

Shares of U.S. Cellular ($USM) and Telephone and Data Systems ($TDS) surged Thursday following an upbeat note from Raymond James, which upgraded both stocks to ‘Outperform’ from ‘Market Perform.’ 

The firm set price targets of $86 for U.S. Cellular, implying a 32% upside, and $51 for TDS, signaling a potential 56% upside based on Wednesday’s closing prices.

Raymond James analyst Ric Prentiss pointed to the outcome of the 2024 U.S. Presidential election, speculating that a Trump victory could create a more favorable regulatory environment. 

This, he believes, could clear the path for T-Mobile’s ($TMUS) $4.4 billion acquisition of U.S. Cellular to proceed. The deal is expected to close mid-2024.

“We see significant upside in shares of both stocks given the ongoing strategic review and announced asset sales at USM, and now feel the regulatory path to approval is cleaner and timeline should be better,” he wrote in a Thursday note. 

Prentiss also noted that U.S. Cellular, through ongoing strategic reviews and asset sales, may be on track to transition into a standalone tower company, which could lead to a much higher multiple in the future. 

In a separate announcement, U.S. Cellular said on Thursday it agreed with AT&T ($T) to sell a portion of its retained spectrum licenses for $1.018 billion, part of a strategy to opportunistically monetize spectrum not included in its proposed sale to T-Mobile (TMUS). 

It follows a previous deal, announced last month, to sell a portion of these licenses to Verizon ($VZ) and two other mobile network operators.

Both stocks have seen impressive gains in 2024, with U.S. Cellular up nearly 57% year-to-date and TDS rising more than 77%. Over the past six months, the stocks have surged around 83% and 111%, respectively.

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