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Pro Analysis

T-Mobile rally has much further to go: Wells Fargo

John Legere, CEO and president of T-Mobile USA.
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John Legere, CEO and president of T-Mobile USA.

The run-up in T-Mobile this year may be the beginning of a longer rally as the cell service provider generates more cash through the addition of new subscribers, Wells Fargo told clients on Monday, upgrading the stock to outperform.

The potential for a takeover should also raise the stock's valuation, senior analyst Jennifer M. Fritzsche added.

"In our view, we are getting closer to an important 'hockey stick' part of the free cash flow (FCF) generation ramp. This — more than any other metric — will likely become a key focus for investors as we move into late 2016 and 2017," Fritzsche wrote in a research note.

"In addition to the FCF inflection point, we believe TMUS should also see continued positive momentum in subscriber (sub) growth and be helped by the M&A speculation factor post the Presidential election," she wrote.