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This one wireless service stock could blow past earnings

Hipster using a touch screen smart phone hands close up, vintage colors

Now that the Federal Reserve (the Fed) has pivoted its strategy to the opposite end of where it had been throughout 2023, meaning they are now proposing to cut interest rates after an aggressive hiking campaign, it is all the more critical for you to line your portfolio up with stocks that offer two main benefits: growth and stability.

With this strategy in mind, it will become clear why stocks in the wireless service space can become an excellent area to start looking into. It often pays to be a contrarian, but going against the market takes a specific type of nerve that you can only develop after digging deep into the potential opportunity.

The market can get ahead of itself, as the S&P 500 has now hit an all-time high price by reflecting the future potential of interest rate cuts even before there is a set date range for when they might occur.

If the Fed decides to delay these cuts, the market will surely throw a bearish tantrum, dragging most stocks with it except names like T-Mobile US (NASDAQ: TMUS). Here's why:

Singled out 

The economy divides itself into two camps: On one end, the manufacturing sector has shown a consistent year-long contraction, as judged by the ISM manufacturing PMI index

On the other end, the services PMI has been pushing the economy along, and that's where stocks like T-Mobile land.

Despite the services sector slowing down in the past quarter, threatening to throw the space into a contraction along with manufacturing, the wireless service space offers special insurance around it. Think about it: even if the rest of services are contracting and unemployment is rising, people still need their phones, including paying their phone bills on time.

Whether to look for new jobs or everyday necessities, unemployment or a downturn in the sector is unlikely to drag the business fundamentals down with it. 

Not all stocks in the index are created equal, as the technical indicator that measures the advance and decline of individual stocks in an index would show most stocks are struggling. Ever heard of the magnificent seven? Stocks like Alphabet Inc. (NASDAQ: GOOGL) Inc. (NASDAQ: AMZN), and Apple Inc. (NASDAQ: AAPL) are the only few carrying the market onward.

The fact that most stocks are struggling to keep up with the market is concerning, but your job today is not to be a crusader and find the next bubble. Your job today is to figure out why stocks like T-Mobile are also making new all-time highs. Here's an idea.

Overall insurance

Competitors like Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) fell behind T-Mobile in the price action department, as they trade at a respective 91% and 78% of their 52-week high prices today. Price action can be the first pillar upon which to build a view for a specific stock, but here are a few others.

T-Mobile has easily blown past competitors to keep up with the S&P and the NASDAQ: It offers the most growth!

Analysts are pushing for a 37.5% growth in earnings per share in the coming 12 months, which would justify the stock's momentum and valuation today. The market is comfortable paying a 16.6x forward price-to-earnings ratio, and for the same reason, it was comfortable sending this stock to an all-time high.

This multiple represents a premium of 97.8% above Verizon's 8.4x forward P/E and an even more significant 152% premium to AT&T's 6.6x valuation today. The forward P/E is the market's way of putting a value today on tomorrow's expected earnings growth and quality, so the saying "It must be expensive for a reason" applies here.

Remember that T-Mobile stock is also gearing up to announce its quarterly earnings this week. If traders are bidding up the price and their expectations already, you bet they see some big good news coming from this name.

The same analysts that project bullish, above-average growth for T-Mobile are the same ones that assigned a $182.90 price target for the stock, which implies an 11.7% upside from today's prices at all-time highs!

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