The analysts said “SBA is our top pick within our broader communications infrastructure coverage. The Towers as a group look quite attractive, trading at 10 year lows relative to the S&P. After a period of “tower nirvana” when the carriers were all simultaneously upgrading their networks to 4G, growth has ticked down and a host of concerns are now weighing on the stocks. These worries are either non-issues or quite manageable risks. And we fully expect that the passage of time will allay them.”
They also noted that in mid-February, with American Tower’s stock in the $85 range, “who would have guessed that just two months later it would be $20 higher and within spitting distance of a new all-time high? While we did not believe the tidal wave of fear that hit the Towers was in any way warranted, neither did we think it would recede in such a short order, and most clients with whom we spoke at the time were of a similar view. Regardless, we are happy to see the result.”
MoffettNathanson has a Buy rating on T-Mobile (TMUS), Neutral rating on Verizon (VZ), and Sell ratings on Sprint (S) and AT&T (T). In their annual review of ROIC trends — ROIC 2016: Through the Looking Glass (May 12, 2016) — the analysts find “the balance sheets of the companies in our coverage, particularly in the Telecom sector, are a critical consideration. All of the TelCos are significantly more levered than they appear at first blush, leaving them with far less financial flexibility than many might assume. The “real” leverage of the TelCos has profound implications for capital investment expectations, spectrum valuations, network evolution, and the prospects for potential transactions.”
After maintaining an overweight recommendation for the telecom sector for most of the past year, the analysts shifted to a neutral stance in April, downgrading Verizon to Neutral and AT&T to Sell, following a period of unusually strong performance. “T-Mobile is our only “Buy” in telecom, and is our top pick in our coverage universe.
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