“T-Mobile/Sprint is dead. Long live T-Mobile and Sprint,” declares Nick Del Deo, analyst with MoffettNathanson.
After tower investors celebrated the deal’s demise by bidding up the shares of the Big Three, Del Deo feels it’s possible, “the transaction’s corpse will reanimate at some point to once again frighten tower investors.”
“Tens of billions in synergies are a lot to turn down,” Del Deo said, “but the control and relative valuation hurdles seem like they’ll remain tough to crack, and the DOJ might be a real issue if AT&T/Time Warner is any guide.”
With that overhang removed, what should we make of the Towers? “The stocks are trading at their all-time highs and everybody and their mother knows that 2018 is shaping up to be a healthy year for domestic leasing,” he said. “Qualitatively, that doesn’t sound like a terribly attractive setup and would suggest downgrading the names to Neutral would be appropriate. In fact, that was our going-in bias when we started authoring this report. However, after running through the numbers and updating our models, we still don’t think it’s time.”
To be sure, the stocks are not nearly as attractive as they were earlier in the year according to Del Deo. He believes the post-election sell-off will prove to be a truly unique time to have invested in these names. “There’s still edge to be had today, however, and the valuations are not quite as rich as they first appear,” he said.
December 6, 2017
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