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T-Mobile stock pops amid iPhone 7 promotions

An employee, center, assists customers at a T-Mobile US store in New York.
Michael Nagle | Bloomberg | Getty Images
An employee, center, assists customers at a T-Mobile US store in New York.

T-Mobile's stock climbed on Wednesday after the release of iPhone 7 data appeared to impress Wall Street analysts.

The mobile carrier is UBS' top U.S. wireless stock pick, analyst John Hodulik wrote in a research note, as service providers offer aggressive trade-in offers to lure iPhone buyers. The stock rose as high as $46.29 a share, and closed at $45.87, up 1.2 percent.

T-Mobile said this week that iPhone pre-orders had broken previous records, up nearly 4 times compared to the next most popular iPhone and topping pre-registrations for both the iPhone 6S and the popular iPhone 6.

Sprint announced similar pre-orders of the new iPhones, up more than 375 percent in the first three days compared to last year. A Verizon executive later called its iPhone sales volume "business as usual," while AT&T said sales volume was up on a year-over-year basis, according to Bloomberg.

But T-Mobile has financial and strategic value, Hodulik said, as iPhone deals threaten to weigh on margins in the industry.

The four major U.S. carriers offer a free iPhone 7 in exchange for specific trade-in phones. This year's trade-in values are about twice last year's offers, Hodulik estimates. But Sprint, Verizon and AT&T saw their shares rise half a percent or less on Wednesday.

"T-Mobile/Sprint's new attractive unlimited offers are also likely resonating with customers," Hodulik wrote, but added: "We estimate the carriers are losing [about] $300 per iPhone under the trade-in promos (creeping back toward the $450 hit under the old subsidy model), which depending on uptake, could provide incremental pressure on margins."

T-Mobile in particular, though, is under-penetrated with iPhones compared to peers, and has 400 new retail stores on the way, writes Nomura analyst Jeffry Kvaal. Kvaal expects T-Mobile to keep the lion's share iPhone momentum despite increased competition.

T-Mobile shares are up more than 15 percent over the past year.