Shares of telecommunications giant T-Mobile (NASDAQ:TMUS) — which specializes as a wireless network operator — slipped about 2% on Thursday. Earlier in the morning, management announced plans to lay off 5,000 employees, translating to about 7% of its total workforce. The T-Mobile layoffs will occur over the next five weeks. Coming amid other major workforce reduction announcements, investors took a dim view of TMUS stock.
Primarily, the cuts will impact corporate and back-office jobs that are “primarily duplicative,” reports CNN. Notably, T-Mobile CEO Mike Sievert stated in a letter to employees that this move would reduce the firm’s middle management layers. In addition, the company plans to reduce its spending on “external workers and resources.” However, its retail and customer care units will not be affected.
“What it takes to attract and retain customers is materially more expensive than it was just a few quarters ago,” remarked Sievert.
Worryingly, the T-Mobile layoffs follow other high-profile downsizing measures. Last month, InvestorPlace writer William White reported that Microsoft (NASDAQ:MSFT) is cutting more jobs after eliminating 10,000 workers at the start of this year. And in March, Meta Platforms (NASDAQ:META) announced additional workforce reductions following a major cut in November 2022.
Given the economic uncertainty that drove these job eliminations, investors exited TMUS stock.
T-Mobile Layoffs Occur at a Crossroads
Fundamentally, the T-Mobile layoffs appear to be coming at a crossroads. In the second quarter, the telecom firm posted mixed results, suggesting that the job cuts could be a way to help drive TMUS stock into higher gear.
According to Barron’s, for the quarter ended June 30, T-Mobile reported revenue of $19.2 billion, representing a 2.6% decline against the year-ago quarter. Also, the sales tally missed Wall Street’s consensus target of $19.3 billion.
On the other hand, profits for the quarter came in at $1.86 per share, beating the Street’s consensus of $1.69 per share. Also, T-Mobile inked 760,000 postpaid phone net subscriber additions and added 509,000 high-speed internet customers. Both stats landed above their respective consensus estimates.
Still, net customer additions fell slightly on a year-over-year basis, stated CNN. And the mixed signals underscored management’s additions about the difficulties leading up to the T-Mobile layoffs.
“It is clear that doing everything we are doing and just doing it faster is not enough to deliver on these changing customer expectations going forward,” the CEO stated. “Today’s changes are all about getting us efficiently focused on a finite set of winning strategies.”
As a consolation, those affected by the T-Mobile layoffs will receive “competitive severance packages” based on tenure and other considerations.
Analysts Still Positive on TMUS Stock for Now
At the moment, analysts peg TMUS stock as a consensus strong buy. This assessment breaks down as 12 buys, one hold and zero sells. Moreover, the average price target lands at $179.46, implying over 34% upside potential. However, the most recent rating was posted 14 days ago. Therefore, an adjustment reflecting the latest T-Mobile layoffs may arrive later.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
