The past year and a half has been an extremely difficult period for tower equities, to say the least, says Nick Del Deo, CFA at MoffettNathanson. Del Deo notes since the end of 2022, American Tower (NYSE: AMT) is down two percent, Crown Castle (NYSE: CCI) is down 22 percent, and SBA Communications (NASDAQ: SBAC) is down 29 percent, while the S&P 500 is up 49 percent, (all total return).
“Maybe it’s too punitive to compare stodgy infrastructure to an AI-fueled market index,” Del Deo said, ”but slower 5G leasing, DISH’s financial troubles, and higher interest rates have been a toxic brew for the stocks. While overall client interest in the towers has ebbed, we’ve noticed an interesting barbell develop. Investors with shorter horizons are staying away and view the names as almost untouchable, as it’s hard to point to a near-term uptick in industry-wide leasing activity with much confidence.”
Del Deo continues to rate all three of the towers “Buy” and has modestly adjusted his target prices. American Tower (NYSE: AMT) , he said, has outperformed in part because it’s been the easiest of the three to own: holistic master lease agreements secure its domestic outlook and it has proportionately more of its refinancing headwinds and Sprint churn behind it.
But SBA (NASDAQ: SBAC), the most out-of-favor of the group according to Del Deo, with the lowest normalized multiples, remains his preferred name.
“If the stocks can simply hold their current underlying multiples,” he said, “which are far from rich vs. history, even in the context of higher benchmark interest rates, they look as though they can deliver low-to-mid-teens compounded total returns through the end of 2027.”
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