BTIG Research bumped up its outlook for tower companies American Tower and SBA Communications, but opted not to raise its forecast for Crown Castle.
“Our domestic tower outlook was conservative, driven by the contraction of this metric for the three tower operators in 2016,” Walter Piecyk of BTIG wrote in a research note (sub. req.). “We also did not expect AT&T to be active until late in 2017 or even 2018 based on our view that it would prefer one truck roll when deploying AWS-3, WCS, FirstNet and maybe even Dish spectrum.”
Other factors have been a drag on the tower segment as well in recent months. AT&T’s strategy of aggressively renegotiating deals with tower companies has been productive, Wells Fargo analysts said last month, and analysts and investors continue to speculate about the implications of potential consolidation among wireless carriers.
Indeed, tower companies have become “everyone’s punching bag,” Cowen and Company said several weeks ago, despite having a bright future.
But the sudden emergence of unlimited data plans from carriers has come as some major players have raised their guidance and posted first-quarter results.
“It’s unlikely that there was a direct connection from the new unlimited rate plans of the wireless operators and the improved outlook from the tower companies, but it does provide an interesting narrative,” Piecyk wrote. “When it came to guidance, American Tower translated those positive comments to their outlook, forecasting a 15% increase in new domestic leasing activity compared to our estimate of a 4% contraction.”
American Tower’s optimism regarding the U.S. market is offset by its struggling efforts overseas, however, Piecyk noted. A key acquisition in Tanzania that was announced a year has yet to close, for instance, and estimates of lower margins in Europe, the Middle East and Africa prompted BTIG to cut its 2017 estimate for American Tower’s international EBITDA by $58 million.
Nonetheless, BTI raised its target price for American Tower shares to $140, up from $137, and its target price for SBA shares inched up from $145 to $148. BTIG said it remained neutral on shares of Crown Castle and didn’t assign a price target.